Contracts and Sales

Question 1

What is a unilateral K?

Answer 1

Promise for performance. That is, the only way to accept is to perform.

Note***
Once you start performing, offeror cannot revoke.
You can abandon performance as the offeree and not be liable for breach, but you are not entitled to the reward unless and until you finish.

Question 2

What is a bilateral K?

Answer 2

Promise for a promise. See more in consideration.

Question 3

What is a quasi k?

Answer 3

When K law produces an unfair result, it allows the party harmed to win in equity.

Question 4

When does Article 2 of the UCC apply?

Answer 4

Sales of goods, that is, tangible property that is movable at the time of sale.

Question 5

If I am not sure if it is goods or services, what tests are available?

Answer 5

1) Predominant Purpose Test - What is the main reason for the K?
2) Gravamen of Action Test - Did the problem arise from the goods portion or the services portion of the K.

Lecturer only talked about predominant purpose, so I guess use that.

Note:
If the contract expressly divides payment, then apply UCC to the goods portion, and common law to the services portion.
e.g. $5000 for the car, $400 for the driving lessons.

Question 6

What is an offer?

Answer 6

A manifestation of intent to enter a K such that all the other party has to do is accept.

Question 7

If an offer lacks a price term is that a problem?

Answer 7

1) At common law = yes, it’s a k killer.e.g. a k for land must have a description of the land and price term.
2) Under UCC = Not a deal killer. Courts will look at intent of the parties.

Question 8

I will sell you my car for a fair price. Valid offer?

Answer 8

No, vague or ambiguous terms such as “appropriate”, “fair”, and “reasonable” are trigger words that will prevent a statement from being a valid offer at common law or under UCC.

Question 9

What are requirements/output Ks? Are they enforceable? What has to happen for that to change?

Answer 9

Requirements = You must sell to me whenever I have a need.
Output = You must buy all I produce.

Valid, unless vague or ambiguous or the amounts increase in an unreasonably disproportionate manner.

Look for words such as all, only, exclusively, or solely.

Question 10

Is an advertisement an offer?

Answer 10

Generally, no, unless:

1) It creates a unilateral K (100 reward for catches the flu after using my smoke ball.)
2) Specifies quantity and expressly indicates who may accept (1 fur coat for $10, first come, first served.)
3) Price quotes in response to an inquiry.

Question 11

How are offers terminated (4 ways)?

Answer 11

Yes if:
1) A reasonable or stated time lapses (for reasonable, think 30 days, but that’s not exact.)

2) Death or incapacity of either party after offer and before acceptance.

3) Revoked: Generally, offers are freely revocable by later unambigious statement to offeree or unambiguous conduct indicating unwillingness or inability to go through with K, as long as, offeree knows about it (multiple offers by themselves are not enough.)
Exceptions:
a) Option Ks - promise not to revoke, supported by consideration.
b) Firm offers (Merchant [of any kind] + writing + signed + up to 3 months [over 3 months will be reduced]). No consideration needed.
c) Cannot revoke offer to a unilateral K once a party starts performance. Must give him a reasonable time to complete.

4) Rejected
(a) At common law, anything besides a mirror image is a rejection and counteroffer unless a counteroffer is made during an option k period.
Notes -
(i) an inquiry such as “will you take ….” is not an offer/counteroffer.
(b) a conditional acceptance is a counteroffer at common law because it is not a mirror image. e.g. I accept, if, only if, provided that, so long as, but, on condition that, etc.

(b) UCC - A conditional acceptance creates a K (merchants or not).
However, the additional terms come in if the parties are both merchants unless:
(i) The additional terms is material (changes the risk or remedies of one party); and
(ii) The offeree expressly limits the acceptance on the offeror agreeing to the additional term (magic language = “only if” “express condition that”);
(iii) The original offeror has previously objected to the additional term.
If one party is not a merchant than the additional terms are treated as proposals and the offeror must expressly consent.
Note**Different terms are generally subject to the knockout rule, but MA allows the different terms in (no knockout rule in MA).

Question 12

S, a used car dealer, offers to sell B a 1973 Cadillac for $400. The written offer is signed by S. Can S revoke?

Answer 12

Yes. No promise not to revoke.

Question 13

O offers P $1000 to paint his house, but that the offer can only be accepted by performance. P buys paint, then O revokes. Can O revoke?

Answer 13

Yes. P had not begun performance. Mere prep is not enough. If P cannot return the paint, he may recover under PE.

Question 14

How may offers be accepted?

Answer 14

Note to start:
Generally, the offeror control the method of acceptance, but the offer is often silent.

1) Offeree can accept by starting to perform or promising to perform (unless it is a unilateral K, in which case he must finish in order to have accepted.)

2) Mailbox Rule - Generally, acceptance is effective when placed in the mail.
Notes:
a) Comms other than acceptance are only effective upon receipt.
b) If you send a rejection, then an acceptance, whichever arrives first, governs.
c) You cannot use the mailbox rule to meet an option deadline (e.g. Option expires today at 4, so you pop a letter in the mail at 3:45. NO GO).

3) Seller ships the wrong goods.
(a) Generally, this is an acceptance and a breach.
(b) However, if seller ships the wrong goods with a notice of accommodation, then it is a counteroffer, so not a K and not a breach.

Question 15

Who may accept an offer?

Answer 15

1) A person who knows about the offer when they accept (that is, if you do not know about an offered reward when you perform, you are not entitled to the reward); and
2) A person to whom the offer was made. That is, offers cannot be assigned. (No selling an offer made to you.)

Note***Options can be assigned (I can sell my option to you, unless the K giving me the option says otherwise.)

Question 16

Once an offer has been accepted, may I revoke?

Answer 16

No. It is a K if there is also consideration.

Question 17

Under what circumstances might a contract not be legally enforceable?

Answer 17

1) Lack of consideration
2) Lack of capacity
3) SoF
4) Existing laws that prohibit the performance of the agreement
5) Public Policy
6) Misrep
7) Nondisclosure
8) Duress
9) Unconscionability
10) Ambiguity in words of agreement
11) Mistakes at the time of the agreement as to the material facts affecting the agreement.

Question 18

What is the best way to determine if there is consideration?

Answer 18

Is there a bargained for exchange (MA calls bargained for detriment or benefit): Each party doing something the other side wants them to do, like giving up something that they had a legal right to/to do.

(a) Promise for a promise is OK, but an illusory promise is not (e.g. “I’ll do this until I don’t want to anymore” is an illusory promise, but “I’ll do this, and if I want to stop, I’ll give you 10 days notice” is not illusory.) Note that on the bar “Illusory promise” is usually the WRONG answer, but once in a while it’s right.
(b) Past consideration is not consideration unless expressly requested by promisor and there was an expectation of payment by promisee.

(c)
(i) Doing something that you have a contractual or statutory duty cannot be consideration is not consideration at common law. Any modification must be supported by new consideration unless there has been an unforeseen difficulty so severe as to excuse performance or a third party has now promised to pay.
(ii) Art. 2 does not require new consideration for a modification if the modification was done in good faith.

Question 19

When is partial payment consideration for release? e.g. a promise to forgive balance of debt. THIS WILL BE TESTED!

Answer 19

The key is whether a debt is due an undisputed. If the debt is due and undisputed then part payment is not consideration for release.

Compare H59 and H60 on page 20 of the lecture handout.

Question 20

D owes C $1000. Legal action to collect this debt is barred by the SoL. D writes C, “I know I owe you $1000. I will pay you $600.” Is there new consideration for D’s new promise?

If D changes his mind about paying, what are C’s contract law rights?

Answer 20

No new consideration.

This is enforceable though without a K.

Se page 20 of lecture handout.

Question 21

What is promissory estoppel? MEMORIZE

Answer 21

Detrimental reliance (3 elements)

1) Promise.
2) Promisee reasonably relied on that promise to his detriment in a foreseeable way.
3) Enforcement of the promise is necessary to avoid an unjust result.

Question 22

In MA, what is the impact of a promise under seal?

Answer 22

A sealed contract has a conclusive presumption that there is consideration. The K must recite that it is sealed in addition to “L.S.” after the signature.

However, the distinction between sealed and non-sealed instruments does not apply to an undisclosed principal.

Consideration is always required for option ks, regardless of whether sealed or not.

Question 23

When might there be lack of capacity, what result?

Answer 23

1) Infant (under 18)
2) Mental incompetent
3) Intoxicated persons (if other party has reason to know)

(a) cannot hold someone under 18 to a k, but the person under 18 can hold the other party to his end of the bargain.
(b) if someone does not have capacity when she signs the k, but gains capacity (e.g. turns 18) and retains the benefit, then she has ratified the k and can be held to it.
(c) Quasi-K for necessaries requires someone under 18 to pay for these things (food, clothing, shelter) but that remedy is under equity not K law.

Question 24

What is the SoF? MOST IMPORTANT SUBTOPIC IN Ks ACCORDING TO LECTURER

Answer 24

SoF requires certain Ks to be evidenced by objective proof (usually a writing).

MY LEGS is the acronym in the CMR, homeboy in the lecture is only worried about 4.

1) Suretyship (which he says is usually a wrong answer) but it could be correct if there is an actual guarantee to pay the debt of another “only if [the other] does not pay.” See page 23 of lecture handout.

2) Ks incapable of being performed within a year, measured at the time the K was entered into. Look for:
(a) specified term of years even if could be terminated with notice.
(b) a date of performance more than one year from the day the K was signed. (The Kenny G concert hypo).
Ks that can be performed w/in one year include:
(a) A task that says nothing about time because SoF assumes that it is theoretically possible with unlimited resources.
(b) A k to work for the rest of my life.

3) K for an interest in land (not services upon the land and not a one year lease). Look for a multi-year easement, lease, or other interest in land.

4) Sales of goods valued at $500 or more.
(Note leases of goods must be in writing if $1000 or more.)

Question 25

When may SoF be satisfied by performance? COMMON Q ON BAR EXAM

Answer 25

1) Land - If 2 of the following 3 are met, then it is a valid K.
(a) Valuable improvements made on the land by buyer.
(b) Buyer conveys all or part of the purchase price.
(c) Buyer takes possession.
MA requires all three unless a court looks at all the facts and decides that it should be enforced in equity.

2) Service Ks - Full performance required to evidence a K. Part performance does not satisfy SoF. However, even though a P could not recover under K law for part performance, he could recover under quasi-k.

3) Part Performance in UCC
(a) Seller’s part performance only satisfies SoF to the extent of the performance (e.g. P alleges K was for 1000 widgets, but D only delivered 600. SoF only satisfied for 600).
(b) Seller’s part performance can also satisfy SoF if the goods are specially manufactured for buyer and the seller has made a substantial beginning on the work. Remember the Size 28, pink cowboy boots.

Question 26

When a writing is alleged to have satisfied SoF, what is required?

Answer 26

1) K for services - all material terms ($, parties, and subject matter) + sig of party sought to be bound (pretty much always D).

2) K for goods - quantity term + sig of party sought to be bound (pretty much always D) unless the confirmatory memo rule applies.
Confirmatory Memo Rule - When one merchant sends another merchant a memo memorializing their oral agreement for the sale of goods, if the recipient merchant has reason to know of the memo’s contents and does not object in writing within a reasonable time (10 days) then the Confirmatory Memo satisfies SoF.

Question 27

Nancy Botwin, a stay at home mom, sues Esteban Reyes, the mayor of Tijuana, to enforce an alleged contract for Esteban to buy 100 lbs of hominy grits for $500. The only writing is the following: “I agree to buy 100 pounds of grits.” Signed Esteban. Satisfy SoF?

Answer 27

Yes. Sale of goods w/ quantity term and Buyer’s signature.

$500 only material for you to know that we are in SoF land, not needed in the sale of goods K when there is a quantity term and D’s signature.

If this was for services, then the price term would be a material term needed for a good writing. We would also need the parties ID’d in the K.

Question 28

If I want to give Judah permission to enter a contract on my behalf, does that need to be in writing? Will be on exam.

Answer 28

The Equal Dignity Rules states that written proof of authorization to enter into a contract for someone else only needs to be in writing if the underlying contract is within the SoF.

Question 29

Landlord sues me for breaching my one year lease agreement that Judah signed. Judah claims that I gave him permission to sign on my behalf. I file for Sum J claiming that the lease is not enforceable against me since there is nothing in writing giving Judah permission to sign for me. Am I right?

Answer 29

No, it is just a one year lease which is not within the SoF. If it was one year and one day, then I would be right, but it’s not, so I am wrong.

Question 30

If I want to modify a deal after it has been executed, does it need to be in writing?

Answer 30

Only if the modification brings the K within the SoF or keeps it within SoF. The original terms are irrelevant. All that matters is whether the modification will bring it into or outside of SoF land.

Question 31

True or false: At Common law, contract provisions requiring that all modifications be in writing are effective because of freedom to contract.

Answer 31

False:
Under common law, contract provisions requiring that all modifications be in writing are not effective. We ignore the K language.

Under UCC, they are effective unless waived.

Question 32

What is the difference between a K with illegal subject matter and a K with an illegal purpose?

Answer 32

Illegal subject matter - e.g. a contract killing or contract to steal something - is void and not enforceable.

Illegal purpose is enforceable if P did not know of D’s illegal purpose. e.g. Jesse Pinkman sold Walter White his car. Unbeknownst to Jesse, Walter bought it so he could drive it to kill Tuco Salamanca. Jesse can enforce the K because he did not know of Walter’s illegal purpose.

Question 33

When will a K be void for public policy reasons?

Answer 33

Two Examples:

1) An exculpatory agreement for intentional or reckless conduct from liability; OR
2) A covenant not to compete without a reasonable need or reasonable time and place limit.

Question 34

When will a misrep or nondisclosure void a K?

Answer 34

A misrep will void if…

1) Made before the K
2) By a contracting party or her agent
3) That is false
4) That is fraudulent OR material
5) The statement induces consent

A non-disclosure generally will not unless…

1) There’s a fiduciary relationship; or
2) There’s active concealment

Question 35

When will duress or undue influence void a K? Prolly not on exam.

Answer 35

Physical Duress = “Gun to the head”
Economic Duress = Bad guy threatens to breach unless vulnerable guy with no reasonable alternative pays more or does more.

Question 36

When will K be voided for unconscionability. Prolly not on exam.

Answer 36

1) Unfair surprise (procedural prong); and
2) Oppressive terms (substantive prong)
3) Assessed as of the time of the agreement
4) By the court.

Question 37

When will ambiguity void a K? Prolly not on exam.

Answer 37

1) Parties use a material term open to at least 2 interpretations.
2) Each party attaches a different meaning
3) Neither realizes that there are two+ meanings.

“Peerless”

Enforceable only if one party knew that they other party was attaching a different meaning, in which case the innocent party’s interpretation controls.

Question 38

Will mistake of fact get me out of the K? Will be on the exam.

Answer 38

Generally, no.

Can if:
The mistake concerns a basic assumption on which the contract is made
1) Both parties mistaken (not just uncertain)
2) About an existing fact (not something that might happen in the future)
3) That is material (important)
4) And, the party seeking relief does not bear the risk of the mistake.

Price indicating mistake or failing to take an easy step to gain more info are important factors.

Mistake will also get me out if it was a palpable mistake and other party had reason to know about it. (e.g. I meant to send an invoice to my regular supplier asking for my usual order of 100 widgets, and I sent one asking for 1000. The other party should know that I only meant 100 so I can get out of that.)

Question 39

What is the parol evidence rule?

Answer 39

In General: A rule that bars evidence of what was said before the parties reduced their final agreement to writing (parol evidence). Subject to the certain exceptions, neither party will be permitted to contradict or supplement that written agreement with extrinsic evidence, either oral or written.

Specific rules:

1) Never allowed to contradict/change the terms with parol evidence.
2) A mistake in integration (e.g. a typo) can be fixed by looking at parol evidence.
3) Parol evidence of misrep, fraud, or duress is admissible as part of D’s defense.
4) Ambiguities can be cleared up with parol evidence.
5) Supplementary terms can be added only if the agreement is partially integrated (written and final, but not complete; or the additional terms are ones we would expect to find in a separate agreement.)
6) Evidence of an oral express condition is permitted.
* ***Remember, a merger clause is only evidence of complete integration, not determinative.

Question 40

True or false: D admitting in testimony or a pleading that there was an agreement satisfies the SoF?

Answer 40

True

Question 41

True or false: P relying on D’s oral promise to put their agreement in writing will always estop D from using SoF as a defense.

Answer 41

Not always, but sometimes.

Question 42

What is course of performance, course of dealing, and trade usage/custom?

Answer 42

These are forms of conduct that can dictate terms of the contract when terms are left out or ambiguous.

Course of performance - Highest priority - How parties have performed in this contract to this point.

Course of dealing - Next highest priority - How parties have performed throughout their dealings with each other in the past.

Trade Usage/Custom - Third priority - What is the industry standard?

Question 43

How does the UCC determine a party’s shipping obligations and risk of loss? HAS NOT SHOWN UP IN A WHILE, WHICH MEANS WE ARE DUE FOR THIS TO BE THE ESSAY Q.

Answer 43

The parties agreement would control over any of the following default rules.

1. Shipment Contracts
   (a) Language creating it = FOB “Seller’s place” or silent because Shipment Ks are the default rule.
   (b) If a party breaches, then he is liable for any uninsured loss even though the breach may be unrelated to the actual problem.
   (c) If no breach and common carrier delivery, Seller’s RoL shifts to Buyer and Seller’s obligations are complete when Seller delivers to common carrier, makes arrangements for shipping, and informs Buyer.
2. Destination Contracts
   (a) FOB “Buyer’s Place” or any place other than Seller’s Place.
   (b) Same breach rule as above.
   (c) If no breach and common carrier used, RoL remains on seller until the goods are delivered to Buyer’s Place.

If there’s no agreement, no breach, and no common carrier, then look to see if the seller is a merchant.

1. If yes, RoL is on seller until the goods are received (physically possessed) by buyer.
2. If no, RoL is on buyer as of “tender” (buyer is informed that the goods are available to him.)

Question 44

What warranties are available to buyers under the UCC?

Answer 44

1. Express warranties
   (a) Promising, stating facts, or describing.
   (b) Not mere “puff” or salesmanship.
2. Implied Warranty of Merchantability
   (a) Must be a merchant with respect to goods of that kind.
   (b) Goods must be fit for their ordinary purpose (e.g. if a car can be driven, it is fit for its ordinary purpose.)
3. Implied Warranty of Fitness for a Particular Purpose
   (a) Buyer has a particular purpose
   (b) Buyer is relying on seller to help him select suitable goods.
   (c) Seller has reason to know of the particular purpose and Buyer’s reliance.
   (d) The goods are not fit for that particular purpose.

Question 45

What are the limitations on warranties?

Answer 45

1) SoL = 4 years as of tender, not discovery.
2) Privity of K = abolished in MA
3) Buyer examined and should have discovered the defect (does not effect express warranties).

4) Disclaimer
(a) Can’t disclaim an express warranty
(b) IWM must mention “Merchantability” and be conspicuous OR say “as is”/”with all faults”.
(i) As is clauses do not have to be conspicuous.
(ii) Disclaiming IWM has no effect on express w.
Note***In MA, you may not disclaim warranties on consumer goods.

5) May limit warranties, including express warranties as long as it is not unconscionable (prima facie unconscionable if limit ability to recover for personal injuries from consumer goods).
e. g. An express warranty of a mechanism that was limited to replacement parts is valid even though it damaged property when it malfunctioned.

Question 46

What is the Perfect Tender Rule?

Answer 46

Under the UCC only, performance must be exactly what was in the K or it is a breach.

Question 47

What are the buyer’s options in a sale of goods when the delivery does not comply with the PTR?

Answer 47

Reject or accept the goods subject to the following limitations:

1) Rejection must be in good faith.
2) Buyer must take reasonable care of the goods while in his possession and cannot use the goods.
3) Rejection can be limited by cure, installment ks, or acceptance.

Question 48

When does the seller have the right to cure his breach?

Answer 48

Under the UCC, seller may cure if:

1) There is time left for performance; or
2) Seller had reason to believe that tender would be acceptable perhaps with a money allowance. (Check their course of dealing.)

Question 49

How does an installment contract limit the buyer’s ability to reject?

Answer 49

Under the UCC, an installment contract requires or authorizes
(a) Delivery of the goods in separate lots;
(b) To be separately accepted
Right to reject only arises when there’s a substantial impairment with one of the installments that cannot be cured.
Note***This is different than buying something on credit.

Question 50

How can a buyer accept goods?

Answer 50

Under the UCC, buyer accepts if:

1) Failing to timely reject (think 30 days)
2) Retaining the goods is implied acceptance.
1) and 2) basically say the same thing.

Payment without the opportunity to inspect is not acceptance.

Once the buyer accepts, he cannot reject, but he may revoke acceptance under certain circumstances.

Rejection requires:

1) Rejection before acceptance
2) Only if violates PTR
3) Must seasonably notify seller
4) Hold the goods for the seller
5) Follow reasonable seller instructions

Goods go back to seller, buyer relieved of payment.

Question 51

If the time for rejection has passed, how may you revoke your acceptance?

Answer 51

1) Non-conformity must substantially impair the value of the goods, and
2) Excusable ignorance of grounds for revocation or reasonable reliance on seller’s assurance of satisfaction, and
3) Revocation within a reasonable time after discovery of nonconformity.
4) Must seasonably notify seller
5) Hold the goods for the seller
6) Follow reasonable seller instructions

Goods go back to seller, buyer relieved of payment.

See Hypo 135 on page 46 of lecture handout.

Question 52

What are the rules for third party beneficiaries?

Answer 52

1) Exists when two parties enter into a K meant to benefit a third person. (Think life insurance k b/c there’s a third party beneficiary.)
2) On MBE ONLY, if a third party is named in the K, then she is an intended beneficiary.
2a) On the Essays, know this, “Only intended beneficiaries have K law rights. Intent of the two parties to k determines whether intended or incidental.”
3) Third parties are either creditors or donees. If a creditor, to be intended, the creditor must have been a creditor of promisee before the k.
4) Can cancel unless the third party knows of and relies on it.
5) Beneficiary can sue promisor or promisee can sue promisor but not both. Either way, promisor can use the same defenses.
6) Beneficiary cannot recover from promisee, except a creditor beneficiary can recover from promisee on a pre-existing debt.

Question 53

Define the following parties in Third Party Beneficiary Ks:
TP Beneficiary

Promisor

Promisee

Intended vs. Incidental Beneficiary

Answer 53

TP Beneficiary - The one who will ultimately receive the benefit of the K, even though she is not a party. Able to enforce the K made for her benefit (the life ins. beneficiary).

Promisor - The one who will be performing the benefit for the third party beneficiary (the life ins. company).

Promisee - The one who obtains the promise to help the beneficiary (the person making the life ins. k).

Intended vs. Incidental Beneficiary - The beneficiary intended/named or just someone who also happens to benefit from this.

Question 54

What are assignments? Are they kosher?

Answer 54

An assignment is a transfer or rights under a K.

You can do it if the K is formed. Remember, you cannot convey an offer, unless it’s an option.

Question 55

Define the following assignment terms:

Assignor

Assignee

Obligor

Answer 55

Assignor = Party to the K who later transfers rights under the K to another (Batman).

Assignee = Not a party but able to enforce because of the assignment (Robin).

Obligor = The other party to the K besides the assignor (Gotham City).

Question 56

What is an assignment prohibition versus an an invalidation and which is more likely? You’re going to see one of them!!!!!

Answer 56

First of all, a prohibition is much more likely.

Prohibition: Takes away Batman’s right to assign, but if he does anyway, Robin can still enforce it. Language looks like this: “rights hereunder are not assignable”.

Invalidation: Takes away Batman’s right to assign and specifically mentions the consequences of doing so, so if Robin tries to enforce even after Batman assigns, it will be void. Language looks like this: “all assignments under this contract are void”.

Question 57

If a K is silent with regards to assignability what are the rules?

Answer 57

1) Common law bars an assignment that substantially changes the duties of the obligor.
2) An assignment of the right to payment is never a substantial change (e.g. Gotham is to pay Robin not Batman).
3) An assignment of the right to performance other than payment is usually a substantial change. (e.g. Batman is to patrol Metropolis now instead of Gotham).

Question 58

Is consideration required for an assignment?

Answer 58

No, but if there is consideration, it cannot be revoked.

Only gratuitous assignments are revocable.

Question 59

Who can recover from whom in a contract with an assignment that has been breached?

Answer 59

1) Assignee may recover from obligor (stepping into assignor’s shoes).
2) Assignor for consideration cannot recover from obligor.
3) Obligor has same defenses no matter who sues him.
4) Payment by obligor to assignor is effective until the obligor knows of the assignment. Similarly, modification agreements between obligor and assignor are effective if the obligor did not know of the assignment.

5) Implied warranties of assignor in an assignment for consideration include:
a) Right assigned actually exists.
b) The right assigned is not subject to any then existing defenses by obligor.
c) Assingor will do nothing after assigning (like discharging debt) to impair the value of the assignment.

Question 60

After assigning the K with Gotham to Robin for $10 and doing all of the work himself, can Batman collect from Gotham? WILL BE ON EXAM.

Answer 60

No, he assigned all his rights to Robin for consideration so his assignment cannot be revoked.

Question 61

In the case of assignor making multiple assignments, who’s assignment has priority?

Answer 61

1) If all gratuitous then the last assignee generally wins.
2) If some or all are for consideration, then the first assignee for consideration wins.
(see page 54 of lecture notes for a very very limited exception)

Question 62

What are the rules for a delegation of duties?

Answer 62

1) Generally duties are delegable unless
(a) K prohibits such delegations or prohibits assignments (works to prohibit delegations too).
(b) Personal services for very special skills

Question 63

What if after a delegation, the third party delegatee does not perform?

Answer 63

1) Delegating party always remains liable.

2) Delagatee liable only if she receives consideration from delegating party.

Question 64

P contracts to paint O’s house for 1k. X then agrees wiht P that X will do the painting for P because P is a good friend. X does not do the work.

1) Can O recover from P?
2) Can P recover from X?
3) Can O recover from X?

Answer 64

1) Yes, delegating party always remains liable.
2) No, there’s been no consideration from P to X.
3) Same as 2)

Question 65

P contracts to paint O’s house for $1000. X then agrees wiht P that X will do the painting for P and P will pay X $900. X does not do the work.

1) Can O recover from P?
2) Can P recover from X?
3) Can O recover from X?

Answer 65

1) Yes, delegating party always remains liable.
2) Yes, there’s been consideration from P to X.
3) Yes, third party beneficiaries rules. A delegation for consideration creates a third party beneficiary obligation.

Question 66

What non-monetary remedies are available in K law?

Answer 66

1) Spec. Perf. or Injunction
(a) not generally available unless we lack an adequate legal remedy such as real estate or unique goods.
(b) No spec. perf. for services, but maybe injunctive relief.

2) Reclamation from insolvent buyer - e.g. I sold to him on credit, but he didn’t pay. In order for me to get the goods back, I must show the buyer was insolvent when he received the goods, and the seller demands return within 10 days, and the buyer has the goods at the time of demand. See page 59 for more.
3) Entrustment - O bails watch to S for repair, and then S sells to B, a bona fide purchaser. O cannot recover from B, only S.

Question 67

On Jan 15, S sells widgets to B on credit. The widgets are delivered to B on January 22. B is insolvent on January 22. S learns of B’s financial difficultie and demands return of the widgets on January 27. B still has the widgets on Jan 27. Can S get the widgets back by reclamation?

Answer 67

Yes:
Insolvent when bought.
Demand within 10 days.
B in possession when demanded.

Question 68

What is the purpose of compensatory damages? MEMORIZE THIS ANSWER AND MAKE IT THE START OF YOUR RULE STATEMENT IN A REMEDIES ESSAY.

Answer 68

To compensate P, not punish D. Puts P in the position he would have been in had the K been fully performed, that is, the remedy fulfills his expectations.

Question 69

Are punitive damages available in K law?

Answer 69

NO! Often a wrong answer on K MBE Qs.

Question 70

P contracts to paint O’s house for $1000, payable when P completes the work. P anticipates making $200 profit from this contract. O breaches after P has started work and used $100 of paint and labor. P sues O for breach of contract. What is the measure of P’s damages?

Answer 70

$300

Question 71

In UCC, what are the four rules for calculation damages?

Answer 71

1) Seller breach, buyer keeps goods = FMV if perfect minus FMV as delivered (or cost of repair.)
Allows buyer to receive the benefit of his bargain.
e.g. Paid 30k, car worth 34k if perfect, car worth 20k as delivered. Damages = 14k.

2) Seller breaches, seller has goods = market price at time of discovery of breach minus k price or reasonable replacement price (whichever is greater).
Buyer not punished for not finding the absolute best deal, as long as, he is reasonable.
e.g. Contract for $5000. At time of breach, good costs $6600. Buyer pays $7000. Damages = $2000.

3) Buyer breaches, buyer keeps the goods = K price.
If you k for something, and you breach, but decide to keep it anyway. You must pay the K price.
e.g. K price is $800, but buyer doesn’t pay. K price is now $900. Buyer still only owes $800.

4) Buyer breaches, seller has goods = K price minus resale price, or, if seller cannot resell, the K price.
e.g. 1973 Caddie to X for $1000. X breaches. Seller sells to B for $800. Damages from X = $200.
Note***This could also trigger the lost volume seller rule, which gives seller his lost profits if he has a theoretically unlimited supply of the goods even if he resells the good that buyer breached on.

Question 72

What are incidental damages?

Answer 72

1) Costs in dealing with the breach such as storing rejected goods or finding a replacement service provider.
2) Always recoverable

Question 73

What are consequential damages? ALWAYS ON MBE AND WE’RE DUE FOR IT AS AN ESSAY TOPIC.

Answer 73

1) Breaching party is liable for foreseeable consequential damages.
2) These are special damages, particular to this plaintiff.
3) D must have reason to know of these special circumstances at the time of the contract.

e.g. Losing $1000 from the closure of P’s mill due to D’s breach by not delivering a replacement part on time. P would have to tell D about his special circumstances.

In MA, consequential damages also include injury to person or property proximately resulting from a breach of warranty.

Question 74

What if P continues to perform after D has breached?

Answer 74

P has a duty to mitigate so his avoidable damages will be subtracted from his recovery.

Question 75

What if damages cannot be calculated with reasonable certainty because it is a new business or new business activity?

Answer 75

Need to look for reliance damages instead of expectation damages. Can recover out of pocket expenses.

Question 76

What is a liquidated damages clause? Is it enforceable?

Answer 76

1) It’s a clause in a K that fixes the amount of damages in the event of a breach.
2) It is valid if:
(a) Damages are difficult to calculate when the K was made; and
(b) the provision is a reasonable forecast. (Unreasonable if it’s a single set # rather than a formula or range.)

Note: In MA, and most jurisdictions, mitigation is irrelevant.

Question 77

Do you have to perform if the other guy doesn’t?

Answer 77

No, Nonperformance by other party lets you not perform.

Question 78

What are the consequences of anticipatory repudiation?

Answer 78

Anticipatory repudiation if repudiation was unambigious.

(a) If unambiguous, you can sue now or after performance becomes due unless claimant has already finished her performance, in which case you must wait.
(b) Ant. Rep. can be retracted unless non-breaching party tells breacher that the breach is being treated as final or detrimentally relies on the ant. rep. (material change in position required).
(c) If does retract, then performance by non-breaching party can be delayed until adequate assurance has been provided by breacher.

In MA, there is some old case law that says Ant. Rep. is not part of MA common law. It is unclear if that would continue today. There are also numerous exceptions. Ant. rep. does apply in UCC Ks because MA has adopted UCC.

Question 79

What if there has been no unambiguous repudiation, but you think the other guy might not perform?

Answer 79

Insecurity about whether other party will perform - allows you to demand adequate assurances and, if commercially reasonable, suspend performance until the assurances have been provided.

Question 80

What if the other party performs improperly? WILL BE ON EXAM

Answer 80

1) Under UCC, see PTR.

2) At common law, apply substantial performance rule.
(a) Damages can always be recovered for a breach.
(b) Only a material breach by one guy excuses the other guy from performing.
(c) Material breach is lack of substantial performance, usually amounts to less than 50% of performance if quantity involved, but at the end of the day it’s a fact question.
(i) Breach of quality of performance - using a lesser material, painting the wrong color. Not a material breach if the material or color, etc. is roughly comparable.
(ii) Breach of quantity of performance - performing fewer of the acts than promised.

Question 81

P contracts to paint ten identical apartments for O for $10,000. P breaches after painting two apartments.

1) Was there a material breach?
2) Must O pay P for painting the two apartments?

WILL BE ON THE BAR!!!

Answer 81

1) Yes, material breach.

2) O does not owe P in K law, but does owe for unjust enrichment/quasi contract.

Question 82

What is an express condition? Are they valid? Can you not perform if violated?

Answer 82

An express condition exists when the contract, which is the words of both parties, contains a statement that limits acceptance “if” “only if” “provided that” “so long as” “subject to” “in the event that” “unless” “when” “until” and “on condition that”.

If it contains those words, then strict compliance is required and performance is excused, that is, unless the party it is meant to protect waives.

Parol evidence is admissible to prove an oral express condition.

(Check hypo 217 versus hypo 210 on pages 68-69 of lecture handout)

See page 70 for more.

Question 83

When can a later K excuse performance?

Answer 83

1) Rescission = Before both parties complete performance, both parties agree to rescind. This is an independent K supported by consideration.
2) Accord and Satisfaction - Parties later agree to some different performance to satisfy performance obligations (must truly be different, not just a lesser amount of the same performance). Contains and If/Then statement The “IF” is the Accord, the “THEN” is the satisfaction. NEED BOTH. If the new agreement is performed, then the original obligation is excused. If the new obligation is not performed, the original agreement governs.
3) Modification - An agreement by the parties to an existing obligation to accept a different agreement in satisfaction of the existing obligation. Contains the word “instead”. The mere making of the new agreement excuses the old obligations, and the new modified agreement governs.

D) Novation - an agreement between both parties to an existing K to the substitution of a new party. Novation excuses the party who is substituted out/replaced. Differs from a delegation only because both parties are agreeing to it rather than one delegating, and in the excusal as a result.

Question 84

D borrows $1000 from C and agrees to pay the loan with interest. Later, D and C agree that if D delivers 20 widgets by the end of the month, then the debt will be excused. D does not deliver the widgets.

What is the K provision at issue?

Can C recover on the original loan agreement?

Can C recover from D on the accord?

Answer 84

A&S.

Yes and Yes, but not both. Either/Or.

Question 85

D borrows $1000 from C and agrees to repay the loan with interest. Later, D and C agree that D will deliver 20 widgets by the end of the month instead of paying $1000 with interest. D does not deliver the widgets.

What is the K provision at issue?

Can C recover on the original loan agreement?

Answer 85

Modification

No.

Question 86

Under what circumstances will an unanticipated event excuse a party from performing?

Answer 86

1) Impossibility
At common law:
(a) Who wants out?
(b) What’s his obligation?
(c) What happened that makes him want out?
(d) Is it physically possible to do it?
Considerations:
(i) Paint a house versus build a house that burned down. It is possible to build a house after it burns down, it is not possible to paint a house that burns down.
(ii) Specific item or interchangeable item?

In UCC, do RoL first. If on buyer, buyer pays. If on seller, then buyer doesn’t pay, but whether he can collect from the seller depends on steps (a)-(c) above.

2) Frustration - Purpose of the K that both parties understand is frustrated. e.g. the flat at the king’s coronation (Krell v. Henry).
3) Illegal - subsequent law makes someone’s performance illegal.
4) Death after K does not excuse performance. Death of a party kills an offer, not a contract unless the person is a “special” person (like an actor, athlete, etc.)
4) Impracticability - did not discuss in lecture

Question 87

What rules for charitable pledges in MA?

Answer 87

Enforceable if there’s consideration or reliance.

Question 88

A vague term in a contract can be cured by:

A the presumption that the parties’ intent was to include a reasonable term
B gap fillers
C part performance
D quantum meruit

Answer 88

C part performance

Question 89

When should the nonbreaching party treat an otherwise minor breach as a material breach?

A When the breach is part of a divisible contract
B When the breach causes the nonbreaching party damages
C When the breach is coupled with an anticipatory repudiation
D When the breach relates to the timing of performance

Answer 89

C When the breach is coupled with an anticipatory repudiation

If a minor breach is coupled with an anticipatory repudiation, the nonbreaching party may treat it as a material breach. Thus, the nonbreaching party may sue immediately for total damages and is permanently discharged from any duty of further performance. The courts hold that the nonbreaching party must not continue on with the contract, because to do so would be a failure to mitigate damages.

Unless the nature of the contract is such as to make performance on the exact day agreed upon of vital importance, or the contract by its terms provides that time is of the essence, a failure by a promisor to perform at the stated time will not be material. Thus, a minor breach that relates to the timing of performance generally should not be treated as a material breach

Question 90

In an installment contract situation, the contract can be canceled by the buyer if:

A Any shipment is deficient in quantity
B There is a nonconformity in a shipment that substantially impairs the value of the installment and cannot be cured
C Any shipment fails to conform to the contract in any way
D There is a nonconformity in a shipment that substantially impairs the value of the contract and cannot be cured

Answer 90

D There is a nonconformity in a shipment that substantially impairs the value of the contract and cannot be cured

Question 91

Which of the following statements is correct regarding damages for a breach of a contract for the sale of goods?

A Either a nonbreaching buyer or a nonbreaching seller may recover consequential damages, but only a buyer may recover incidental damages
B Either a nonbreaching buyer or a nonbreaching seller may recover incidental damages, but only a buyer may recover consequential damages
C Either a nonbreaching buyer or a nonbreaching seller may recover consequential damages, but only a seller may recover incidental damages
D Either a nonbreaching buyer or a nonbreaching seller may recover incidental damages, but only a seller may recover consequential damages

Answer 91

B Either a nonbreaching buyer or a nonbreaching seller may recover incidental damages, but only a buyer may recover consequential damages.

Consequential damages are special damages over and above standard expectation damages. These damages result from the nonbreaching party’s particular circumstances and are recoverable only if a reasonable person would have foreseen them as a probable result of breach. Note that in contracts for the sale of goods, only a buyer may recover consequential damages

Question 92

Which of the following types of evidence may be outside the scope of the parol evidence rule?

A Evidence of a condition precedent
B Evidence of a contemporaneous oral agreement
C Evidence of a prior oral agreement
D Evidence of a condition subsequent

Answer 92

A Evidence of a condition precedent

The parol evidence rule prohibits admissibility of extrinsic evidence that seeks to vary, contradict, or add to an integration. Other forms of extrinsic evidence may be admitted when they will not bring about this result, i.e., they will fall outside the scope of the parol evidence rule. When a party asserts that there was an oral agreement that the written contract would not become effective until a condition occurred, all evidence of the understanding may be offered and received. This would be a condition precedent to effectiveness. The rationale is that one is not altering a written agreement by means of parol evidence if the written agreement never came into being. It should be borne in mind that parol evidence of such a condition precedent will not be admitted if it contradicts the express language of the written contract. Parol evidence is inadmissible as to conditions subsequent to the formation of the contract, i.e., an oral agreement that the party would not be obliged to perform upon the happening of an event. This latter type of condition limits or modifies a duty under an existing or formed contract. Under the parol evidence rule, when the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain (i.e., the writing is an integration), any other expressions, written or oral, made prior to the writing, as well as any oral expressions contemporaneous with the writing, are inadmissible to vary the terms of the writing.

Question 93

Unless properly disclaimed, this warranty is included in every contract for the sale of goods:

A Warranty against infringement
B Warranty of title
C Implied warranty of merchantability
D Implied warranty of fitness for a particular purpose

Answer 93

B Warranty of title

The warranty against infringement, which warrants that goods are delivered free of any patent, trademark, copyright, or similar claims, arises automatically only in contracts by merchant sellers.

Question 94

Which of the following would not be considered valuable consideration that supports a contract?

A A benefit with no economic value.
B Peace of mind for the promisor.
C The gratification of influencing the mind of another.
D Fulfillment of a condition to receive a gift.

Answer 94

D Fulfillment of a condition to receive a gift.

The mere fulfillment of a condition to receive a gift is not adequate consideration. The fulfillment of the condition must be of some benefit to the promisor to constitute proper consideration. The benefit to the promisor need not have economic value. Peace of mind or the gratification of influencing the mind of another may be sufficient to establish bargained-for consideration.

Question 95

Which of the following normally would not be an exception to the preexisting legal duty rule?

A A minor’s ratification of a contract upon reaching the age of majority.
B A compromise based on an honest dispute as to duty.
C Payment of a smaller sum to settle an existing debt.
D An acceleration of the performance of the duty.

Answer 95

C Payment of a smaller sum to settle an existing debt.

Question 96

The rights of a third-party beneficiary vest when he:

A Signs the contract; makes an enforceable promise in the contract; or provides consideration for the promise in the contract
B Is named in the contract; is identifiable by the terms of the contract; or is identifiable at the time of performance
C Receives notice of the existence of the contract; is a creditor of the promisee; or is an intended, not incidental, beneficiary
D Manifests assent to the promise; brings suit to enforce the promise; or materially changes position in justifiable reliance on the promise

Answer 96

D Manifests assent to the promise; brings suit to enforce the promise; or materially changes position in justifiable reliance on the promise

Question 97

An intended beneficiary must be:

A Identifiable at the time performance is due
B Present at the time the performance is due
C Notified at the time the contract is made
D Named at the time the contract is made

Answer 97

A Identifiable at the time performance is due

Question 98

As a general rule, if the promisor fails to perform under a contract, a donee third-party beneficiary whose rights have vested can sue:

A The promisee
B The promisor
C The promisee and the promisor
D The promisee or the promisor

Answer 98

B The promisor

Question 99

Which of the following best describes the elements required for an effective assignment?

A An adequate description of the right being assigned, consideration, and present words of assignment
B A writing containing an adequate description of the right being assigned and present words of assignment
C An adequate description of the right being assigned and present words of assignment
D Consideration and a writing containing an adequate description of the right being assigned and present words of assignment

Answer 99

C An adequate description of the right being assigned and present words of assignment

Question 100

On November 5, an athletic shoe manufacturer entered into a written contract with a shoe store to carry its running shoes. The contract included a provision that “5% of the proceeds attributable to the sale of the manufacturer’s shoes by the shoe store during the month of February (American Heart Month) each year would be donated to the local hospital’s cardiovascular wing.” The day after the parties signed their contract, the store owner informed the hospital of the planned donation and indicated that the hospital could expect to receive about $1,500 in early March. In anticipation of the donation, the hospital purchased a new heart monitor on January 5. Because the Christmas sales season had been poor, on January 15 the manufacturer and the shoe store agreed to modify their contract to eliminate the provision for payments to the hospital’s cardiovascular wing. When the hospital did not receive the payment in March, it discovered that the parties had modified the agreement.

If the hospital brings an action against the shoe store to recover 5% of the proceeds from the sale of the shoes, is it likely to prevail?

A Yes, because the hospital’s rights vested when it learned of the original agreement.
B Yes, because the hospital detrimentally relied on the parties’ agreement.
C No, because the hospital’s rights had not vested when the modification was made.
D No, because the payment is a gift, and the hospital is a donee-beneficiary.

Answer 100

B Yes, because the hospital detrimentally relied on the parties’ agreement.

The hospital is likely to prevail because it relied to its detriment on the parties’ agreement. An intended third-party beneficiary can enforce a contract only after its rights have vested. Vesting occurs when the beneficiary: (i) manifests assent to the promise in a manner invited or requested by the parties; (ii) brings suit to enforce the promise; or (iii) materially changes position in justifiable reliance on the promise. Here, the hospital purchased the heart monitor in detrimental reliance on the agreement between the manufacturer and the shoe store. The reliance was reasonable because the store owner informed the hospital of the agreement, the approximate amount that they would receive, and the date they would receive it. Once the hospital’s rights vested, the manufacturer and the store could not vary the hospital’s rights without the hospital’s consent. (A) is incorrect because, as noted above, the third-party beneficiary’s rights do not vest until occurrence of one of the specified conditions. Vesting does not automatically occur on execution of the contract or when the beneficiary learns of the promise. (C) is incorrect because the hospital’s rights vested when it purchased the monitor in reliance on the agreement, which occurred before the modification. (D) is incorrect because the fact that the payment was a gift and that the hospital is a donee-beneficiary does not mean that the hospital cannot enforce its rights as a third-party beneficiary.

Question 101

On March 1, a health food store owner and a health food distributor entered into a written agreement providing that the distributor would supply the store owner with his natural foods requirements over the next 12 months. In return, the store owner agreed to purchase only from the distributor. The agreement also provided that payment for any purchases made under the agreement during the month of April would be turned over to a nonprofit food research corporation, “to carry on its good works.” On April 1, the store owner ordered and the distributor shipped 20 cases of health food products, at a wholesale price of $4,000, which remains unpaid. On April 15, the store owner sold his store, inventory, and accounts receivable to a chain operation that also sells health food products. As part of the sale, the store owner assigned to the chain operation the contract with the distributor. The chain operation promptly notified the distributor of the sale and assignment. The $4,000 for the April 1 transaction remained unpaid and, on May 31, the food research corporation commenced suit to collect the money.

Against whom may the action be maintained?

A The store owner only.
B Both the store owner and the chain operation.
C The chain operation only.
D Neither the store owner nor the chain operation.

Answer 101

B Both the store owner and the chain operation.

The store owner remains liable based on his contract with the distributor, and the chain operation is liable based on its assumption of the contract with the distributor. The food research corporation is expressly designated in the contract between the store owner and the distributor as a party to whom payment for any April purchases is to be directly made. Thus, the portion of the contract providing for payment is primarily for its benefit. Consequently, the food research corporation is an intended third-party beneficiary of the store owner’s promise to make the April payment. As the third-party beneficiary, it has a right of action against the promisor (the store owner) for enforcement of the promise to pay. When the store owner assigned to the chain operation his contract with the distributor, the chain operation was deemed to have assumed the store owner’s duties under that contract as well as being assigned the rights thereunder. Thus, the chain operation can be held to the duty to pay for the health food products that were ordered in April. Although the chain operation is deemed to have assumed the duties of the store owner under the contract, the store owner (the delegator) remains liable on the contract. Consequently, the food research corporation has a right of action for the April payment against both the store owner and the chain operation (although it will be limited to only one recovery, see below). (A) and (C) are incorrect because they conclude that, as between the store owner and the chain operation, only one of them has the duty to tender the required payment. As explained above, both the store owner and the chain operation are under this duty. (D) is incorrect because, as discussed above, both the store owner and the chain operation are liable. Of course, there will be only one recovery, so as not to cause a windfall as a result of the breach. Generally, the purpose of contract damages is to put the nonbreaching party in the position it would have been in had the contract been performed.

Question 102

A small computer company contracted with a community college to supply computer tech support for all of the college’s faculty and staff beginning September 1. Two weeks before the date that performance was to begin, the computer company received a more lucrative offer at a large university. In order to fulfill its contract obligations to the community college, the company delegated its duties under the contract to another computer company for $1,000 above the contract price. The community college agreed to allow the replacement computer company to perform the services, but on September 1, the replacement company refused to perform.

If the community college sues the replacement company, what will the result be?

A The replacement company will prevail, because the community college’s only remedy is against the computer company.
B The replacement company will prevail, because $1,000 is grossly inadequate consideration.
C The community college will prevail, because there has been a novation.
D The community college will prevail, because it is an intended third-party beneficiary of the computer company - replacement company contract, and the replacement company assumed the duty of performance under the contract.

Answer 102

D The community college will prevail, because it is an intended third-party beneficiary of the computer company - replacement company contract, and the replacement company assumed the duty of performance under the contract.

The community college will prevail in its suit against the replacement company because there was a delegation of duties plus an assumption of duty on the part of the replacement company, supported by consideration, creating a third-party beneficiary situation in which the obligee can compel performance or bring suit for nonperformance. Because the replacement company has promised that it will perform the duty delegated and that promise is supported by consideration, an assumption of duty has occurred and a third-party beneficiary situation is created in which the community college can compel performance or bring suit for nonperformance. Thus, (D) is correct and (A) is incorrect. (B) is incorrect because a court would probably not even inquire into adequacy of consideration when the value of the consideration was satisfactory to the parties involved. (C) is incorrect because the facts do not clearly indicate a novation. A novation occurs where a new contract substitutes a new party to receive benefits and assume duties that had originally belonged to one of the original parties under the terms of the old contract. A novation discharges the old contract. A novation will be found when there is (i) a previous valid contract; (ii) an agreement among the parties, including the new party to the new contract; (iii) the immediate extinguishment of contractual duties as between the original contracting parties; and (iv) a valid and enforceable new contract. Here, the facts do not state or otherwise indicate that a new contract was created and the duties under the old contract were discharged. Thus, this is not a novation situation.

Question 103

The owner of a house put the property up for sale. A surgeon entered into negotiations with the owner to purchase the house, and the parties agreed upon a sale price of $200,000 and a closing date. The owner told the surgeon that she would drop a contract in the mail and have her attorney draw up a deed. The owner signed a land sale contract, which included the property’s address but did not contain a metes and bounds legal description. She mailed the contract to the surgeon that afternoon, although it was mailed too late for the last mail pickup of the day. The owner’s attorney promptly drew up a deed and dropped it in the mail to his client. The surgeon received the contract the next day. After she mailed the contract, the owner received an offer of $250,000 for her property from her next-door neighbor, who wanted to expand beyond his own property line. The owner called her attorney and told him to inform the surgeon that the deal was off. The attorney e-mailed the surgeon, stating that his client had found another purchaser for the property, and that all matters regarding the surgeon’s offer for the property were rescinded. The surgeon signed the contract anyway and returned it to the homeowner by registered mail.

If the surgeon brings an action to compel the owner to convey the property to him for $200,000, is he likely to prevail?

A Yes, because the owner signed the land sale contract.
B Yes, because the contract was effective when the owner placed the document in the mail.
C No, because the surgeon did not mail the signed contract until after he received the revocation by e-mail.
D No, because the land sale contract does not contain the complete legal description of the property.

Answer 103

A Yes, because the owner signed the land sale contract.

The surgeon is entitled to specific performance because the owner signed the land sale contract. A contract was formed here when the parties orally agreed to the sale of the property. However, the contract was unenforceable at that time because, under the Statute of Frauds, a contract for the sale of land is unenforceable unless a memorandum containing the contract’s essential terms is signed by the party to be charged. Here, the party to be charged is the owner, and she signed the land sale contract, a writing sufficient to satisfy the Statute of Frauds (a memorandum for the sale of land is sufficient if it contains the price, a description of the property - which need not be a “legal” description - and a designation of the parties). Thus, the contract was enforceable. Specific performance is allowed when the legal remedy (damages) would be inadequate, such as with contracts to purchase land, which is unique. Therefore, the surgeon is entitled to specific performance (assuming the property has not already been sold to a bona fide purchaser); under the facts the neighbor had made an offer but nothing indicates that the owner accepted the offer yet. (B) is incorrect because the contract was effective when the parties orally agreed to it. The contract became enforceable when the owner signed it, not when she placed it in the mail. (C) is incorrect because this is not a mailbox rule issue. The contract was already formed before the attorney attempted to revoke the offer. Thus, his attempt at revocation was ineffective. It did not matter when the surgeon mailed the contract. (D) is incorrect because, to satisfy the Statute of Frauds, a description need not be a complete legal description, but need merely be sufficient to reasonably identify the subject of the contract. It is sufficient that the property was identified by its address.

Question 104

A man of seemingly modest means died, leaving his nephew as his sole heir. Among the items inherited by the nephew were some old oil paintings. The nephew knew nothing about art and had no place to put the paintings in his home. He placed an ad in the paper offering to sell the paintings at a price to be mutually agreed upon. A buyer for an art gallery responded to the ad. The buyer did not identify himself as an art gallery buyer or tell the nephew that he was knowledgeable about art. Rather, he concocted a story about wanting the paintings for his country estate. The nephew, for his part, revealed his lack of knowledge about art when he told the buyer that his uncle had probably painted the pieces himself. From the signature and the style, the buyer recognized that the artist was a renowned 19th century American portrait artist. The nephew and the buyer agreed upon a price and executed a contract. However, before the nephew delivered the paintings to the buyer, or the buyer paid him, he sought to rescind the contract. The buyer insisted that the nephew deliver the paintings to him and threatened to sue for breach of contract if he did not.

Which argument would give the nephew the best basis for rescinding the contract with the buyer?

A The nephew told the buyer that his uncle had probably painted the paintings himself.
B The nephew did not know that the buyer was a professional buyer for an art gallery and was knowledgeable about art.
C The buyer falsely told the nephew that the paintings were going to be used to furnish his (the buyer’s) country estate.
D The contract was still executory on both sides.

Answer 104

A The nephew told the buyer that his uncle had probably painted the paintings himself.

The nephew may be able to rescind the contract on the grounds of unilateral mistake if the buyer was aware that the nephew was mistaken about the identity of the artist. Where only one of the parties is mistaken about facts relating to the agreement, the mistake usually will not prevent formation of the contract. However, if the nonmistaken party is aware of the mistake made by the other party, he will not be permitted to snap up the offer; i.e., the mistaken party will have the right to rescind the agreement. Under the facts in this choice, the buyer knows that the nephew is mistaken about the identity of the artist, which is a basic assumption of the contract for the paintings. To obtain rescission, the nephew would also have to establish that the mistake creates a material imbalance in the exchange and that he did not assume the risk of that mistake. The facts in choice (A) give him the best grounds for doing so. (B) is incorrect because the fact that one of the parties to the contract has superior knowledge about the subject matter of the contract does not by itself justify rescission, even if the other party is unaware of that fact. The buyer’s knowledge or lack of it was not a basic assumption on which the contract was made and was not relied on by the nephew in making the sale. (C) is incorrect because the buyer’s misrepresentation to the nephew as to how he will use the paintings does not appear to have been relied on by the nephew. Hence, the misrepresentation is not significant enough to serve as grounds for rescinding the contract. (D) is incorrect because while it is true that a contract must be executory on both sides to be effectively discharged by rescission, this fact alone will not be sufficient to effect a rescission. Rather, when only one of the parties is seeking rescission, as is the case here, that party must prove an adequate legal ground (e.g., mistake, misrepresentation, duress, and failure of consideration). In this case, as discussed above, the ground of unilateral mistake will provide the nephew with the best basis for rescinding the contract.

Question 105

A sailing enthusiast went to a boat builder and told him that he wanted a yacht built to his specifications. They agreed that the price would be $400,000, and that the sailing enthusiast was to make payment in full within 30 days after he had accepted delivery of the yacht. They further agreed that the boat builder would not subcontract any of the work. The boat builder, however, contacted a master sail maker and subcontracted the sails for the yacht to him. They agreed orally that the boat builder would pay the sail maker $25,000 for the sails within 20 days of receiving them. The boat builder did not tell the sail maker of his agreement with the sailing enthusiast regarding subcontracting. The sail maker made the sails and delivered them to the boat builder, who then completed the yacht and delivered the boat to the sailing enthusiast. Although the yacht was built to his specifications, the sailing enthusiast refused to accept it after he learned that the boat builder had subcontracted for the sails. When the 20-day payment period for the sails had expired, the sail maker went to the boat builder and demanded the $25,000. The boat builder told the sail maker that he could not pay the $25,000 unless the sailing enthusiast paid him for the yacht.

If the sail maker brings an action against the boat builder for breach of contract, is he likely to prevail?

A Yes, because both parties are merchants.
B Yes, because the sail maker fully performed.
C No, because the boat builder had agreed not to subcontract.
D No, because their agreement was oral.

Answer 105

B Yes, because the sail maker fully performed.

The contract between the sail maker and the boat builder is enforceable despite the Statute of Frauds because the sail maker fully performed. The contract here was for the sale of goods (sails) for the price of $500 or more; thus, the contract is within the Statute of Frauds. A contract within the Statute of Frauds is generally unenforceable absent written evidence of a contract signed by the party to be charged. However, there is an exception to the general rule for goods received and accepted. Here, although the contract was oral, the boat builder accepted the sails, and so he is bound despite the Statute. Note that the boat builder might also be bound under another exception to the Statute - for specially manufactured goods if the sails were made specially for the yacht and were not suitable for sale to others. (A) is incorrect because the UCC does not exempt merchants from the Statute of Frauds. Although it provides a special confirmatory memo rule by which a merchant may be bound even if his signature does not appear on the writing evidencing the contract, here there is no writing at all. (C) is incorrect because it is irrelevant. The fact that the boat builder agreed not to subcontract is relevant to whether he breached his contract with the sailing enthusiast, but it does not affect his contract with the sail maker. (D) is incorrect because, as stated above, the contract here falls within an exception to the Statute of Frauds because the boat builder accepted the sails.

Question 106

A builder and a wealthy landowner entered into a written contract whereby the builder would build on the grounds of the landowner’s estate a mausoleum, using imported granite, to hold the remains of the landowner’s recently deceased wife. The cost of the mausoleum was set at $100,000. After the contract was signed but before construction began, an international incident occurred. The incident resulted in various governments enacting an embargo, which prevented the builder from obtaining the granite he planned to use to build the mausoleum. The builder could get the granite from another source, but it would cost an additional $25,000. The builder explained the situation to the landowner, who agreed to pay $125,000 to have the mausoleum built. The builder prepared a writing stating that the price for the mausoleum was now $125,000. Both the builder and the landowner signed the writing. After the work was completed, the landowner gave the builder a certified check for $100,000 and refused to pay one penny more.

If the builder brings suit against the landowner to recover the additional $25,000, will the builder likely prevail?

A Yes, because the modification was fair and equitable in view of the unanticipated increase in the cost of granite.
B Yes, because the later agreement was in writing and signed by the parties.
C No, because the builder had a preexisting duty to do the work for $100,000.
D No, because the 25% increase in price that the builder was trying to force on the landowner is unconscionable.

Answer 106

A Yes, because the modification was fair and equitable in view of the unanticipated increase in the cost of granite.

The builder will likely prevail. Under the modern and better view of the Restatement (Second), a promise modifying a duty under a contract not fully performed on either side is binding if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made. Here, the contract had not been performed on either side at the time of the modification, the embargo is a circumstance unanticipated by the parties when the contract was made, and the increase is fair and equitable in light of the circumstances (it reflects only the builder’s increased costs). Thus, the builder should succeed in his suit for the additional $25,000. (B) is incorrect because whether there is a signed writing is immaterial when there is a failure of consideration and thus no contract to be enforced. (C) is incorrect because it states the traditional rule and does not take into account the unanticipated circumstances of the embargo. Generally, modification of a building contract requires consideration, and performance of a preexisting legal duty is not consideration. Even the slightest change in performance is generally sufficient to constitute consideration, but here there was no change in the builder’s duties in exchange for the additional $25,000 payment. Thus, under the traditional view, the modification would not have been valid, and the landowner would have been liable only for the amount agreed to in the original contract. (D) is incorrect because courts rarely recognize unconscionability based on price alone—and then only if the parties were in vastly unequal bargaining positions, which does not appear to be the case here. Moreover, a 25% increase alone is very unlikely to be found unconscionable. Had there been consideration, this modification undoubtedly would have been enforceable.

Question 107

A large wholesale dealer in produce had never done business with a certain greengrocer who operated a small chain of markets in the Midwest. They entered into a written agreement whereby the wholesale dealer agreed to supply to the greengrocer the “fuzzy” variety of peaches at $35 per 50-pound lot. The agreement contained a provision stating that the greengrocer will buy “as many 50-pound lots of fuzzy peaches as the greengrocer chooses to order.”

Assuming that the greengrocer has not yet placed any orders for peaches with the wholesale dealer, is this agreement between the parties enforceable?

A Yes, because it is a valid requirements contract and, as such, is enforceable under the Uniform Commercial Code.
B Yes, because the Uniform Commercial Code will imply reasonable terms.
C No, because the total quantity of the contract is not specified.
D No, because there is no consideration on the greengrocer’s part.

Answer 107

D No, because there is no consideration on the greengrocer’s part.

The agreement is not enforceable because the greengrocer’s promise is illusory. For a contract to be enforceable, consideration must exist on both sides, i.e., each party’s promise must create a binding obligation. If one party has become bound but the other has not, the agreement lacks mutuality because one of the promises is illusory. Here, the wholesale dealer has promised to supply the greengrocer with fuzzy peaches at a fixed price. The greengrocer, however, has not promised to order any peaches from the wholesale dealer. Even if the greengrocer decides to sell fuzzy peaches, it has not bound itself to order them from this particular wholesale dealer. The illusory nature of the greengrocer’s promise makes the agreement unenforceable on consideration grounds. (A) is incorrect because in a valid requirements contract, both parties’ promises create binding obligations: The promisor binds itself to buy from the supplier all that it requires, and the supplier binds itself to sell to the promisor that same amount. Consideration exists because the promisor is suffering a legal detriment; it has parted with the legal right to buy the goods it may need from another source. Under the UCC, which governs in this case because a contract for the sale of goods is involved, a good faith term is implied: The buyer’s requirements means such actual requirements as may occur in good faith. Thus, if the provision had stated instead that the greengrocer will buy “as many 50-pound lots of fuzzy peaches as the greengrocer shall require,” it would be a valid requirements contract under the UCC because it requires the greengrocer to buy fuzzy peaches only from the wholesale dealer and to act in good faith in setting its requirements. (B) is incorrect even though the UCC will imply reasonable terms under certain circumstances. Such terms as price and time for performance need not be spelled out in the contract; the terms will be supplied by a “reasonableness” standard if that is otherwise consistent with the parties’ intent. However, supplying reasonable terms will not change the express terms of the contract. The provision that the greengrocer will buy as many peaches as it chooses to order is not sufficiently obligatory to be saved by the court supplying reasonable terms. (C) is incorrect because if the agreement were otherwise a valid requirements contract, the absence of a total quantity term would not matter. As a general rule in sale of goods contracts, the quantity being offered must be certain or capable of being made certain. The UCC provides that an agreement to buy all of one’s requirements is sufficiently certain because requirements usually can be objectively determined. Furthermore, the quantity ultimately required in good faith must not be unreasonably disproportionate to any stated estimate or any normal requirements (in the absence of a stated estimate). Hence, if the greengrocer had contracted to buy all of its requirements from the wholesale dealer, the absence of a term specifying total quantity would not have made the agreement unenforceable.

Question 108

The father of a young child whose life was saved by doctors at a hospital emergency room called the president of the hospital and told her that he will donate $50,000 to the hospital, payable in 90 days, in consideration of the doctors’ saving his child’s life. The president recognized the father’s name as a wealthy philanthropist who had donated generously to other worthy causes, and accepted the offer. The president promptly informed the hospital’s board of directors of the father’s offer and her acceptance of the offer. The board approved the purchase of a new respirator for $50,000 and authorized the president to enter into a written contract with a medical devices company to make the purchase, which she did. Once the child recovered, the father changed his mind and refused to give the hospital the $50,000.

If the hospital sues the father, what would the hospital’s best theory be to recover the $50,000?

A The father’s offer was supported by consideration.
B The father was estopped from not performing under a theory of detrimental reliance.
C The father’s offer constituted fraud in the inducement.
D The terms of the father’s offer were definite and certain.

Answer 108

Answer Discussion - Correct

B The father was estopped from not performing under a theory of detrimental reliance.

The hospital’s best theory to recover the $50,000 would be promissory estoppel (detrimental reliance). Under section 90 of the Second Restatement, a promise is enforceable, even without consideration, if the promisor reasonably expects to induce action or forbearance and such action or forbearance is in fact induced. (The remedy may be limited as justice requires.) Here, the father called the hospital’s president and promised to donate $50,000 to the hospital. Based on that promise, and the president’s knowledge that the father was a wealthy philanthropist who could make good on the promise and had donated generously to other worthy causes, the hospital’s board of directors authorized the hospital president to purchase a new respirator for $50,000, which she did. The father should have reasonably expected to induce such action, and such action was in fact induced. Therefore, the father was estopped from not performing. (A) is incorrect because in most jurisdictions “past” or “moral” consideration is not sufficient consideration because it was not bargained for. If something was already given or performed before the promise was made, it will not satisfy the “bargain” requirement because it was not given in exchange for the promise. Here, the doctors had already saved the daughter’s life when the father made his offer; the father’s promise was not made to induce the doctors to act, nor did the doctors act to induce the father’s promise. Thus, (A) is not correct. (C) is not correct because there is nothing in the facts to suggest that the father engaged in fraud in the inducement, i.e., that he made his promise knowing he had no intention of keeping it; rather, he simply changed his mind. Fraud in the inducement occurs when one party induces another to enter into a contract by asserting information he knows to be untrue, and the innocent party justifiably relies on the fraudulent misrepresentation. In such cases, the contract is voidable by the innocent party. (D) is incorrect because, although it is true that the father’s offer was definite and certain, there can still be no contract absent consideration.

Question 109

After extensive negotiations, representatives for an automobile manufacturer and a tire maker orally agreed on the specifications for a supply of tires. The lawyer for the car manufacturer then drafted a written agreement and sent it to the tire maker’s lawyer, who modified the draft and sent it back to the car manufacturer. This writing was signed by both parties. The tire maker now brings an action for breach of contract against the car manufacturer seeking damages. The car manufacturer attempts to introduce the testimony of its chief negotiator describing the oral agreement with the tire maker representatives that the tires would meet certain requirements of the car models. The tire maker objects, arguing that the parol evidence rule bars admission of this testimony.

Which of the following is the best argument supporting admission of the testimony?

A The memorandum signed by the parties was not a complete integration of their agreement.
B The parol evidence rule does not bar evidence interpreting a written agreement.
C The car manufacturer detrimentally relied on the oral agreement in signing the memorandum.
D The parol evidence rule does not exclude misrepresentations.

Answer 109

A The memorandum signed by the parties was not a complete integration of their agreement.

The best argument for admission of the testimony is that the memorandum does not cover the entire agreement between the parties and was thus not a complete integration. Because the writing contains no mention of the oral agreement to meet certain car models requirements, the testimony would not “interpret” it in any way. Thus, (B) is incorrect. (C) and (D) are wrong because there is no evidence that the car manufacturer detrimentally relied on the oral agreement in signing the memorandum, or that the tire supplier’s promise constituted a misrepresentation at the time it was made.

Question 110

An amateur sculptor ordered from an art museum’s gift shop a miniature reproduction of a favorite statue, which the museum’s flyer indicated was for sale only at the gift shop. He printed an order form from the museum website and sent it to the museum, along with a check to cover the price. The museum received and processed the order, but by mistake sent, by common carrier, a reproduction of a different statue. The statue was stolen from the carrier en route to the sculptor’s home.

Between the buyer and the museum, who bears the loss?

A The loss falls on the museum because it was the museum that selected the carrier and made the arrangements for shipment.
B The loss falls on the museum because it sent the wrong statue.
C The loss falls on the buyer because the risk of loss shifted to the buyer when the museum received and accepted the payment.
D The loss falls on the buyer because the risk of loss passed to him when the statute was delivered to the carrier.

Answer 110

B The loss falls on the museum because it sent the wrong statue.

The museum suffers the loss because the risk of loss was still with it when the statue was stolen. The UCC presumes a contract is a shipment contract in the absence of a contrary agreement. In a shipment contract, the seller must ship the goods by carrier but is not required to tender them at a particular destination. (A “ship to” address does not make a contract a destination contract.) In a shipment contract, the risk of loss generally passes to the buyer when the goods are delivered to the carrier. There is an exception, however, if the buyer has a right to reject the goods. In that case, the risk of loss does not pass to the buyer until the defects are cured or the buyer accepts the goods. The UCC requires perfect tender; i.e., the goods and their delivery must conform to the contract in every way. Here, the shipment of the wrong statue (a nonconforming good) constituted a breach, and the buyer had a right to reject it. Thus, the risk of loss did not pass to the buyer, and the loss falls on the museum with respect to the theft. (A) is incorrect because risk of loss here is determined by the fact that the shipment was a breach of contract; it is not determined by who selected the carrier and made the arrangements. (C) is incorrect because the risk of loss did not shift to the buyer. Furthermore, it misstates the general rule. Under the general rule, the risk of loss passes when the seller delivers the goods to the carrier, not when the seller accepts payment. (D) is incorrect because, as stated above, risk of loss does not pass to the buyer if the buyer has a right to reject the item. (D) would be correct were it not for the breach.

Question 111

A man went to his local sporting goods store and told the salesperson that he wanted a tennis racket that was very high-end. The salesperson showed him a racket that he said was made of the finest titanium and would probably last for years. The man bought the racket and left the store. After playing with the racket for three days, it suddenly snapped in two when he hit a hard shot. He showed it to the tennis pro at his club who informed him that the racket was painted plastic.

If the man sues the sporting goods store, which of the following best describes the legal basis for his suit?

A The store breached the implied warranty of fitness for a particular purpose and an express warranty that the racket was made of titanium.
B The store breached the implied warranty of merchantability and an express warranty that the racket would last for years.
C The store breached both the implied warranty of fitness for a particular purpose and the implied warranty of merchantability.
D The store breached the implied warranty of merchantability and an express warranty that the racket was made of titanium.

Answer 111

D The store breached the implied warranty of merchantability and an express warranty that the racket was made of titanium.

The best argument is that the store breached both the implied warranty of merchantability and an express warranty that the racket was made of titanium. An express warranty will arise from any statement of fact or promise. Here, the salesperson said that the racket was made of titanium. This is a statement of fact that will give rise to a warranty. An implied warranty of merchantability will arise in every sale by a merchant unless disclaimed. To be merchantable, goods must be fit for ordinary purposes, and arguably a racket that breaks right away because it is made of plastic is not fit for ordinary purposes. (A) is wrong because an implied warranty of fitness for a particular purpose arises only when: (i) a seller has reason to know the particular purpose for which the goods are to be used and that the buyer is relying on the seller’s skill and judgment to select suitable goods; and (ii) the buyer in fact relies on the seller’s skill or judgment. Here, the buyer did not convey a particular purpose. He merely stated he wanted a high end racket. There was no indication that the man was looking to the seller’s skill or judgment in selecting the racket. Thus, the implied warranty of fitness did not arise. (C) is wrong for the same reason. (B) is wrong because no express warranty arose regarding how long the racket would last. The statement that the racket would probably last for years is not a statement of fact, but a prediction of the future or puffery. Moreover, it is not specific—it is qualified by the use of “probably,” and how long is “years”? This statement amounts to mere puffery and will not give rise to a warranty.

Question 112

The owner of a condominium hired a cleaning and junk removal service to clean his condominium after he moved. The parties agreed in writing that the company was to completely empty out the condominium, wash the walls and floors, and clean the appliances in exchange for $1,500. Shortly after beginning performance, the company assigned to a creditor its right to all monies due under the contract (i.e., $1,500), and the creditor promptly notified the condominium owner of the assignment. The condominium owner acknowledged the assignment. The company continued working, completely emptying out the condominium, washing the walls and floors, and cleaning all of the appliances except for the oven before quitting the job. It would cost $150 to hire a substitute to clean the oven. The condominium owner refuses to pay the creditor anything because of the cleaning service’s breach.

If the creditor sues the condominium owner, how much, if anything, is the creditor entitled to recover?

A $1,500, the amount assigned, and the condominium owner may look to the company to recover for the minor breach.
B The reasonable value of the labor and materials expended by the company on the portion of the job it did complete.
C $1,350, on a theory of substantial performance.
D Nothing, because the condominium owner’s duty to pay is subject to a constructive condition precedent, and the assignee takes subject to the defense that the condition has not been satisfied.

Answer 112

C $1,350, on a theory of substantial performance.

The creditor will be able to recover the contract price less damages for the company’s minor breach. Generally, an assignee has whatever rights his assignor would have against the obligor. Similarly, the assignee is subject to any contract-related defenses that the obligor has against the assignor. Thus, the creditor will have whatever rights the company would have against the condominium owner. Here, the company completed all of the tasks that needed to be done except for one (i.e., cleaning the oven). If the work remaining on the contract is minor, the company will be seen as substantially performing its contract, and substantial performance will discharge its duty to perform and obligate payment by the condominium owner. Because the facts state that the cost of finishing the job was relatively small (10% of the cost of the contract), it will probably be seen as a minor breach. Thus, the condominium owner cannot avoid payment of the contract price. However, despite the substantial performance, the other party to the contract may recover damages for the less than complete performance. Thus, the condominium owner will be able to offset his damages from the breach. The creditor then will be able to recover $1,350 (the contract price less the damages). (A) is incorrect because, as stated above, the obligor may offset damages directly against the assignee; he does not have to pay the full contract price and then seek damages from the assignor. (B) is incorrect because this suggests a restitutionary remedy, but, as stated above, the creditor, as assignee of the company, would be able to recover the contract price less damages because the company substantially performed. (D) is incorrect because the constructive condition precedent to the condominium owner’s duty to pay (the company’s performance) has been satisfied here by substantial performance.

Question 113

A large farming concern in the Midwest contracted with a pet food manufacturer to deliver 100 tons of processed cornmeal no later than November 15. The purchase price and delivery terms were specified in the contract, which permitted partial shipments. On November 1, the farming concern delivered 50 tons of cornmeal to the pet food manufacturer with the notification that the balance would be shipped by November 15. The pet food manufacturer rejected the shipment because the written documentation accompanying the shipment did not establish that the cornmeal came from an approved source, as required by the contract. The farming concern responded to this rejection by conceding that the shipment did not conform to the contract and promising to deliver all 100 tons of cornmeal by November 15 with proper documentation.

Which of the following best expresses the pet food manufacturer’s options?

A The pet food manufacturer may notify the farming concern that the entire contract is terminated and that it is going to obtain the 100 tons of cornmeal from another source.
B The pet food manufacturer may notify the farming concern that the contract is terminated as to the 50 tons of cornmeal that was shipped and did not conform to the contract, but must accept the additional 50 tons when it is shipped if it conforms to the contract.
C The pet food manufacturer must allow the farming concern a commercially reasonable time to ship cornmeal that conforms to the contract before it can terminate the contract.
D The pet food manufacturer must allow the farming concern until November 15 to ship cornmeal that conforms to the contract before it can terminate the contract.

Answer 113

D The pet food manufacturer must allow the farming concern until November 15 to ship cornmeal that conforms to the contract before it can terminate the contract.

The pet food manufacturer must allow the farming concern until November 15 to ship cornmeal that conforms to the contract because that is the original date when performance was due. Under the UCC, if a buyer has rejected goods because of defects, the seller may, within the time originally provided for performance, “cure” the defective tender by giving reasonable notice of its intention to do so and making new tender of conforming goods, which the buyer must then accept. Here, the farming concern promised to deliver cornmeal that conforms to the contract by the original date of performance. Thus, the pet food manufacturer cannot declare the contract to be in breach and must accept the farming concern’s delivery of conforming goods if it occurs by November 15. (A) is incorrect because, as discussed above, the farming concern has the right to cure until November 15. (B) is incorrect because the farming concern has the right to cure the defective tender of the 50 tons by November 15, the date when performance is due under the contract. Note too, that the UCC requires perfect tender; thus, the manufacturer would never be required to accept an amount less than full contract amount. If a delivery or goods do not conform to the contract in any way, the buyer may accept all, reject all, or accept some commercial units and reject the rest. The buyer always has the option to reject all of the goods if they or the delivery do not conform to the contract exactly. (C) is incorrect because it states the wrong standard for the time allowed to a seller to cure a defective delivery. It states the standard applied when the seller believed the goods would be acceptable, which is not the case here. When the buyer rejects a tender that the seller reasonably believed would be acceptable, the seller, on reasonable notification to the buyer, has a further reasonable time beyond the original contract time within which to make a conforming tender. In this case, the time for performance under the original contract has not expired, and the farming concern has promised to perform within that time. Furthermore, there is nothing in the facts to suggest that the farming concern believed its original shipment was reasonable; the farming concern acknowledged that the shipment did not conform to the contract and there was no indication that the pet food manufacturer had previously accepted nonconforming goods.

Question 114

A hairstylist entered into a contract with a hairspray manufacturer in which the manufacturer agreed to supply the hairstylist with all of its “long lasting” hairspray (reputed to be the longest lasting in the industry) that the hairstylist would need over the next five years. In the second year of the contract, the hairspray manufacturer learned that the hairstylist was “butchering” high-profile clients’ hair and using the hairspray to hold the style, and feared that the negative publicity would harm its reputation and decrease sales. It sent a letter to the hairstylist stating that it would send no more hairspray.

If the hairstylist files suit for specific performance against the manufacturer, will he prevail?

A Yes, provided the hairspray is in fact the “longest lasting” and no other hairspray would suffice.
B Yes, because the hairstylist relied to his detriment on the manufacturer’s promise to supply the hairspray for five years.
C No, because specific performance is not available for a contract for the sale of goods.
D No, because the hairstylist’s use of the product will harm the hairspray manufacturer’s reputation, and therefore is inequitable, and specific performance is an equitable remedy.

Answer 114

A Yes, provided the hairspray is in fact the “longest lasting” and no other hairspray would suffice.

The buyer of goods may obtain specific performance where the seller refuses to deliver goods if the goods are unique or circumstances are otherwise proper. Here, the hairspray was reputedly the “longest lasting” in the industry and presumably no other hairspray would measure up to it. Thus, (A) is correct. (B) is wrong because there was a valid contract between the parties, and detrimental reliance is a remedy in cases where there is no contract. (C) is wrong because it is overbroad. Specific performance is available for contracts for the sale of goods where money damages would be inadequate to secure substitute goods. (D) is wrong. Specific performance is an equitable remedy and thus subject to equitable defenses such as unclean hands. However, the hairstylist’s action in “butchering” his customers’ hair is not the sort of wrongdoing that implicates the doctrine of unclean hands. The haircuts are not a “wrongdoing” in any moral, ethical, or legal sense, and the hairstylist certainly engaged in no improper conduct arising out of the same transaction that is the subject of the contract, with respect to contractual duties (i.e., paying for the hairspray he received). Hence, (D) is incorrect.

Question 115

A wholesale seller of mobile phones entered into a contract with a retailer, who was in the business of selling electronics, to sell 50 of a particular model phone at a cost of $200 apiece, or a total cost of $10,000. When the phones were delivered, the retailer discovered that 20% of them were defective. The retailer promptly sent the seller an electronic check for 80% of the contract price ($8,000).

Did the retailer make a proper rejection?

A Yes, because the phones were defective.
B Yes, because the retailer paid for the phones that were not defective.
C No, because the retailer accepted the phones and failed to seasonably notify the seller of any rejection due to defects.
D No, because the retailer kept all of the phones and did not return the defective phones to the seller.

Answer 115

C No, because the retailer accepted the phones and failed to seasonably notify the seller of any rejection due to defects.

The retailer did not properly reject, because he accepted the phones and failed to give proper notice of rejection. A buyer who receives nonconforming goods generally has the right to accept all, reject all, or accept any commercial units and reject the rest. Here, 20% of the phones shipped were defective, so the retailer had a right to reject. To properly reject, the rejecting party must, within a reasonable time after delivery and before acceptance, reject the goods or notify the seller of the rejection. Here, the retailer failed to reject the goods or notify the seller of the defects. He merely transferred payment for less than the contract price. Thus, the retailer cannot rely on the defect in claiming a breach, and his rejection was improper; i.e., he has accepted the goods. (A) and (B) are wrong because, although the retailer does not have to accept defective goods or pay for them, he must give the seller notice of the specific defect or he cannot rely on that defect in rejecting. (D) is not as good a choice as (C) because the retailer could have rejected the goods without returning them. As discussed above, the retailer was required to reject or notify the seller of the defects.

Question 116

A building contractor entered into a contract with the local college to remodel a residence hall during the summer. As specified by the contract, the work had to be completed before the fall semester began at the beginning of September. Because the contractor received a great deal of other maintenance business from the college, his price of $400,000 was significantly lower than other contractors and he was not going to demand payment until the work was completed. By the end of the first week in August, the contractor had completed 75% of the project and had expended $350,000 in labor and materials. At that time, however, a labor dispute between the contractor and his employees prompted most of the workers to walk off the job. Because prospects for a quick settlement of the dispute were doubtful, the contractor informed the college that he would not be able to meet the completion deadline. A week later, the college obtained another contractor who was able to finish the project by the end of August. The college paid him $150,000, which included a substantial amount of overtime for his workers. The increase in value of the residence hall due to the remodeling was $425,000.

The original contractor, who had not been paid, files suit against the college, which files a counterclaim against him. What should the contractor recover from the college?

A Nothing, because the contractor breached the contract.
B $200,000 in restitutionary damages, which is the difference between its expenditures and the amount the college paid the other contractor to complete the work.
C $250,000 in restitutionary damages, which is the contract price minus the amount the college paid the other contractor to complete the work.
D $275,000 in restitutionary damages, which is the difference between the value of the completed remodeling and the amount the college paid the other contractor to complete the work.

Answer 116

C $250,000 in restitutionary damages, which is the contract price minus the amount the college paid the other contractor to complete the work.

The contractor should be able to recover $250,000 in restitutionary damages. Where a builder in a construction contract breaches during the construction, the nonbreaching party is entitled to the cost of completion plus compensation for any damages caused by the delay in completing the building. Most courts, however, will allow the builder to offset or recover for work performed to date to avoid the unjust enrichment of the owner. This restitutionary recovery is usually based on the benefit received by the unjustly enriched party. If substitute performance is readily obtainable, damages are measured by the unpaid contract price minus the cost of completion (up to the value of the benefit received by the defendant). Here, the contractor’s duty to complete the project was not discharged by impossibility; he could have hired another contractor to take his place or yielded to his employees’ demands. Hence, the contractor’s failure to complete the remodeling constituted a breach of contract and resulted in the college having to expend $150,000 to have the building completed on time. However, the contractor did not receive any payments for the work that he did before breaching; the college would be unjustly enriched if it does not have to pay for any of this work. The benefit of the completed remodeling is measured by the contract price, $400,000, because a restitutionary recovery here would be based on the failed contract between the parties and substitute performance is readily obtainable. This amount is reduced by the $150,000 cost of completion that the college can recover from the contractor, leaving a net recovery of $250,000 for him. (A) is incorrect. Most modern courts would permit the contractor to recover in restitution to prevent the college’s unjust enrichment from the work that he did. (B) is incorrect because recovery measured by the claimant’s detriment (i.e., his reliance interest) is an appropriate alternative only where the standard “benefit” measure would achieve an unfair result; it is not applied where the party seeking restitutionary recovery was the breaching party. (D) is incorrect because courts will always limit relief to the contract price where the claimant is the breaching party. Measuring the benefit to the college in terms of the value of the improvements rather than the contract price will deny to the college the benefit of the bargain that it became entitled to when the contractor breached.

Question 117

A homeowner and a builder entered into a written contract to build a sauna in a spare room in the homeowner’s home at a cost of $3,000. The contract contained a clause stating that the builder will not begin construction without prior approval of the plans by the homeowner’s certified public accountant. The builder submitted his designs to both the homeowner and the accountant. The homeowner liked the plans, but the accountant did not and withheld his approval. The builder asked the homeowner whether she wanted him to submit new designs. The homeowner told the builder orally, “No! Your designs are great! My accountant is crazy! You go right ahead and construct the sauna.” The builder constructed the sauna. The homeowner now refuses to pay the builder, citing the clause requiring approval by the accountant.

If the builder sues the homeowner, what will the builder likely recover?

A The full contract price, because the accountant’s approval was not a condition precedent for the contract to take effect.
B The full contract price, because once the builder began building the sauna after speaking to the homeowner, the homeowner did nothing to stop the builder.
C The reasonable value of the builder’s services and materials, because otherwise the homeowner would be unjustly enriched.
D Nothing, because the homeowner’s oral statement will be excluded by the parol evidence rule.

Answer 117

B The full contract price, because once the builder began building the sauna after speaking to the homeowner, the homeowner did nothing to stop the builder.

By her statement to the builder, the homeowner waived the benefit of the condition requiring the accountant’s approval of the design plans, and the builder detrimentally relied on the statement by building the sauna. Thus, there is a binding waiver of the condition. A condition is an event, other than the passage of time, the occurrence or nonoccurrence of which creates, limits, or extinguishes the absolute duty to perform in the other contracting party. The occurrence of a condition may be excused under a number of different circumstances. One such circumstance is where the party having the benefit of the condition indicates by words or conduct that she will not insist upon it. If a party indicates that she is waiving a condition before it happens, and the person affected detrimentally relies on it, a court will hold this to be a binding estoppel waiver. The promise to waive the condition may be retracted at any time before the other party has detrimentally changed his position. Here, the contract provided that the builder could not begin work without the accountant’s prior approval. This approval was a condition that had to be met before the homeowner’s duty to pay would arise. When the homeowner told the builder to commence working on the sauna, even though the accountant had withheld his approval, the homeowner was telling the builder that she was waiving the condition of the accountant’s approval. The builder then acted in detrimental reliance on this statement by in fact starting and completing the building of the sauna. While the homeowner could have retracted her statement and reinstated the condition prior to the builder’s detrimental reliance, she did nothing when the builder began working on the sauna. Under such circumstances, the homeowner made a binding waiver of the condition and will be estopped from asserting it. Thus, the builder is entitled to recover the full contract price. (A) is incorrect because, as discussed above, the accountant’s approval was a condition precedent for the parties’ contractual duties to arise. The builder’s duty to build the sauna and the homeowner’s duty to pay for it would not arise without the condition of the accountant’s approval either being satisfied or being excused. (C) is incorrect because unjust enrichment is a quasi-contract alternative that the builder could utilize if he did not have a contract remedy. Here, however, the builder can recover the full contract price because the homeowner waived the condition and is estopped from retracting the waiver. (D) is incorrect because the parol evidence rule does not prohibit evidence of a subsequent modification of a written contract; the rule applies only to prior or contemporaneous expressions. Consequently, it may be shown that the parties altered the integrated writing after its making. The oral agreement between the homeowner and the builder described in the facts was made subsequent to the writing. Therefore, the parol evidence rule is inapplicable to this agreement.

Question 118

A buyer agreed to buy a limited edition guitar from a seller for $12,000 and a contract memorializing the agreement was signed by both parties. The next day, after the seller received an offer of $20,000 for the guitar, he called the buyer and said that he could not sell the guitar to him for $12,000. The buyer did not respond. On the delivery date, the buyer fails to tender $12,000 and the seller does not deliver the guitar.

On these facts:

A The seller can recover from the buyer for breach of contract.
B The buyer can recover from the seller for breach of contract.
C Neither the seller nor buyer can recover until one of the parties tenders performance.
D The contract is terminated.

Answer 118

B The buyer can recover from the seller for breach of contract.

The buyer can recover because the seller’s phone call was an anticipatory repudiation. Anticipatory repudiation occurs where a promisor, prior to the performance time, unequivocally indicates that he cannot or will not timely perform, allowing the nonrepudiator the option of suspending performance and waiting to sue until the performance date, or to sue immediately. The seller’s phone call was an unequivocal statement that he would not sell the guitar for $12,000. This repudiation excused the buyer’s duty to tender $12,000 on the delivery date. (A) is incorrect because the seller’s anticipatory breach excused the buyer’s performance. (C) is incorrect because the seller’s repudiation the day after the contract was signed gave rise to an immediate cause of action. (D) is wrong because the contract was not terminated; rather, it was anticipatorily breached by the seller.

Question 119

The owner of a summer house entered into a written agreement with a plumber. The contract contained a clause requiring all plumbing work to be completed by noon on June 1 and provided that the homeowner would pay the plumber $1,200 for his work. The plumber began working on the job on May 28. When he quit working for the day on the afternoon of May 29, half of the job was completed. Shortly thereafter, a heavy rain began, which caused a flash flood. The house was swept away in the flood waters.

Which of the following best describes the obligations of the plumber and the homeowner after the flood?

A Neither the plumber nor the homeowner is discharged from their obligations under the contract.
B The homeowner is obliged to pay the plumber $1,200.
C The plumber is discharged from his obligation but is entitled to recover from the homeowner the fair value of the work he performed prior to the flood.
D Neither the plumber nor the homeowner have any further obligations.

Answer 119

C The plumber is discharged from his obligation but is entitled to recover from the homeowner the fair value of the work he performed prior to the flood.

The destruction of the house discharges the plumber’s duties due to impossibility, but the plumber has a right to recover for the reasonable value of the work he performed. Contractual duties are discharged where it has become impossible to perform them. The occurrence of an unanticipated or extraordinary event may make contractual duties impossible to perform. If the nonoccurrence of the event was a basic assumption of the parties in making the contract, and neither party has assumed the risk of the event’s occurrence, duties under the contract may be discharged. If there is impossibility, each party is excused from duties that are yet to be performed. If either party has partially performed prior to the existence of facts resulting in impossibility, that party has a right to recover in quasi-contract for the reasonable value of his performance. While that value is usually based on the benefit received by the defendant (unjust enrichment), it also may be measured by the detriment suffered by the plaintiff (the reasonable value of the work performed). Here, the house on which the plumber was to perform plumbing repairs was totally destroyed in a flood. The facts indicate that this flood was of such an unexpected nature that its nonoccurrence was a basic assumption of the parties, and neither party was likely to have assumed the risk of its occurrence. Thus, it has become objectively impossible for the plumber (or anyone else) to complete the job. This impossibility will discharge both the homeowner and the plumber from performing any contractual duties still to be fulfilled. Therefore, the plumber need not finish the repair work, and the homeowner is not obligated to pay the entire amount of $1,200. However, the plumber can recover under quasi-contract. (A) is incorrect because both parties are discharged. (B) is incorrect because, as discussed above, the homeowner is obligated to pay for the value of the plumber’s services to date, not the full contract price. (D) is incorrect because it fails to account for the fact that the homeowner will have to pay the plumber for the value of the work already performed.

Question 120

An interior decorator asked a woodworker she met at a crafts fair to build a curly maple armoire. They entered into a written contract, with a contract price of $6,500 to be paid upon the decorator’s receipt of the armoire. When the work was completed, the woodworker shipped the armoire to the decorator. After inspecting it, the decorator felt that it was not of the same high level of workmanship as she was expecting, given the other furniture that the woodworker had showcased at the fair, and a good faith dispute arose between the parties as to the workmanship. The decorator sent the woodworker a check for $4,000 marked “payment in full.” The woodworker indorsed and cashed the check, then sued the decorator to recover the $2,500 balance.

What would most courts likely hold?

A The woodworker’s cashing of the check constituted an accord and satisfaction, discharging the decorator’s duty to pay the balance.
B The woodworker can recover the $2,500 balance from the decorator.
C The woodworker is estopped to sue for the balance because he cashed the check knowing that it was being tendered in full settlement.
D The woodworker’s indorsing a check so marked constituted a written release, thereby discharging the contract.

Answer 120

A The woodworker’s cashing of the check constituted an accord and satisfaction, discharging the decorator’s duty to pay the balance.

Most courts would hold that there is a good faith dispute, and the check thus proposed an accord; the woodworker’s act of cashing it is a satisfaction. A contract may be discharged by an accord and satisfaction. An accord is an agreement in which one party to an existing contract agrees to accept, in lieu of the performance that he is supposed to receive from the other party, some other, different performance. Satisfaction is the performance of the accord agreement. An accord and satisfaction generally may be accomplished by tender and acceptance of a check marked “payment in full” where there is a bona fide dispute as to the amount owed. Here, there is a good faith dispute between the parties as to the workmanship on the armoire. Therefore, the decorator’s tender of the check marked “payment in full” and the woodworker’s cashing of the check constituted an accord and satisfaction, discharging her duty to pay the balance. (B) is incorrect because the debt is unliquidated. Generally, payment of a smaller sum than due will not be sufficient consideration for a promise by the creditor to discharge the debt. However, the majority view is that payment of the smaller amount will suffice for an accord and satisfaction where there is a bona fide dispute as to the claim. As discussed above, because the parties had a good faith dispute about the workmanship on the armoire, the decorator’s tender of the check and the woodworker’s cashing of the check constituted an accord and satisfaction, which discharged the decorator’s duty to pay the balance. (C) is incorrect because a promissory estoppel situation does not exist in that there was no change of position by the decorator based on any act or statement by the woodworker. Whenever a party to a contract indicates that she is waiving a condition before it is to happen or some performance before it is to be rendered, and the person addressed detrimentally relies upon the waiver, the courts will hold this to be a binding (estoppel) waiver. Here, there is no indication that the designer detrimentally changed position as a result of the woodworker’s cashing of the check. Therefore, his act of cashing the check could not be considered an estoppel waiver. (D) is incorrect because the woodworker’s indorsement is not sufficient to meet the writing requirement for a release. A release that will serve to discharge contractual duties is usually required to be in writing and supported by new consideration or promissory estoppel elements. While the good faith dispute between the woodworker and the decorator would meet the consideration requirement for a release, the indorsement does not show the kind of circumspection and deliberateness that the writing requirement was intended to ensure. Therefore, the better answer is that the acceptance of the check by the woodworker was a satisfaction, as discussed above, rather than a release.

Question 121

A print cartridge company sent a letter to a business office offering to supply a free premium printer if the business office would agree to purchase all the print cartridges the office would need from the print cartridge company. This letter arrived in the hands of the business owner on the same day the office printer failed. The business office had experienced a slow month and the business owner was trying to decide whether to pay the office rent for the month or fix the printer. Based on the offer, the owner paid the rent. A week after she put the rent check in the mail, the owner received a second letter from the print cartridge company indicating that the printer program was being canceled due to a lack of printers. The next day, before she read the second letter, the owner mailed her acceptance letter to the print cartridge company. The print cartridge company refused to supply the business owner with a printer.

If the business owner brings a breach of contract action against the print cartridge company, how should the court rule?

A For the print cartridge company, because its offer to the business office was not sufficiently definite.
B For the print cartridge company, because its revocation letter was received by the business owner before she dispatched the acceptance letter.
C For the business owner, because she mailed her acceptance letter without being aware that the print cartridge company had revoked its offer.
D For the business owner, because the owner used funds to pay the office rent in reliance on the print cartridge company’s offer.

Answer 121

B For the print cartridge company, because its revocation letter was received by the business owner before she dispatched the acceptance letter.

The print cartridge company will prevail because the business owner could no longer accept the offer. A revocation generally is effective when received by the offeree. A written communication is considered to have been “received” when (i) it comes to a person’s attention, or (ii) it is delivered at a place of business through which the contract was made. The communication need not be read by the recipient to be effective. Hence, the business owner received the revocation when the revocation letter arrived. Her receipt of the revocation letter before she dispatched her acceptance letter effectively revoked the offer (even though the business owner was unaware of its contents when she mailed the acceptance). (A) is wrong because an offer to make a requirements contract (i.e., the buyer promises to buy from a certain seller all the goods it requires and the seller agrees to sell that amount to the buyer) is sufficiently definite because the quantity is capable of being made certain by reference to objective, extrinsic facts (i.e., the buyer’s actual requirements). (C) is wrong because, as stated above, the revocation was effective when it was received (i.e., when it came into the offeree’s possession), not when the offeree becomes aware of the revocation. (D) is wrong because the business owner’s response to the offer was not reasonably foreseeable. As an exception to the general rule that a revocation is effective on receipt, an offer cannot be revoked and will be treated as an option contract for a reasonable length of time where the offeror could reasonably expect that the offeree would rely to her detriment on the offer. However, this exception usually is applied in only two circumstances: an offer for a unilateral contract and a subcontractor’s bid to a general contractor. If the offeror is seeking a bilateral contract in a circumstance other than that of a subcontractor, it would be extremely rare for the offer to be irrevocable due to detrimental reliance. Generally, an offeree must accept the offer before relying on it. Here, it is not even clear that the business owner suffered a detriment (unless she could have skipped paying the rent that month). She was already obligated to pay rent. In any case, nothing suggests that the cartridge company reasonably should have foreseen that the business owner would rely on the offer the way she did (without having accepted it yet).

Question 122

On March 1, the purchasing agent for a suburban school district faxed a “quotation request form” to a supplier of school furniture requesting an offer for the sale of 20 student chairs. The form was on school district letterhead and signed by the purchasing agent. It specified that the offer must be held open for four months and that the price term must be no higher than $30 per chair. The supplier telephoned the purchasing agent and told him that he would sell the school district 20 chairs at $20 per chair. He also agreed to hold the offer open for four months. The purchasing agent thanked the supplier for the offer and indicated that he would get back to him within that time period. On May 1, before the purchasing agent had responded to the supplier’s offer or taken any action in reliance on it, the supplier faxed a letter to the purchasing agent stating that demand for student chairs had been higher than expected and that the offer was terminated. On May 2, the purchasing agent called the supplier, told him that the school district was treating his offer as still being open, and accepted it on its terms.

Did the purchasing agent’s call on May 2 create a legally enforceable contract with the supplier?

A Yes, because the contract is for the sale of goods valued at less than $500.
B Yes, because the school district accepted the offer within three months.
C No, because the supplier did not sign the form specifying the length of time that the offer would be held open.
D No, because a firm offer under the UCC is not effective if its term is more than three months.

Answer 122

C No, because the supplier did not sign the form specifying the length of time that the offer would be held open.

No contract was created because the supplier effectively revoked his offer. Under the UCC, an offer by a merchant to buy or sell goods in a signed writing that, by its terms, gives assurances that it will be held open is not revocable for lack of consideration during the time stated (not to exceed three months). If the term assuring that the offer will be held open is on a form supplied by the offeree, it must be separately signed by the offeror. Here, the school district supplied the form stating that the offer must be held open for four months. The supplier’s verbal assent to that requirement was not sufficient to qualify as a firm offer under the UCC. Thus, he was free to revoke his offer. (A) is incorrect because the fact that a writing would not be required under the Statute of Frauds if a contract had been formed between the parties is irrelevant. A writing is required for a firm offer under the UCC regardless of the value of the goods offered. (B) is incorrect because the school district lost its power of acceptance when the supplier revoked his offer, regardless of the fact that three months had not passed. As discussed above, the supplier’s offer did not constitute a firm offer under the UCC. (D) is incorrect because the fact that the term of the firm offer was more than three months does not invalidate it. If the stated period extends beyond three months, the firm offer will stand, but it will only last for the three-month maximum.

Question 123

On January 1, a car salesman offered to sell an antique car to a collector for $35,000 cash on delivery. The collector paid the car salesman $100 to hold the offer open for a period of 25 days. On January 4, the collector called the car salesman and left a message on his answering machine, asking him whether he would consider lowering the price to $30,000. The car salesman played back the message the same day but did not reply. On January 9, the collector wrote the car salesman a letter, telling him that he could not pay more than $30,000 for the antique car, and that if the car salesman would not accept that amount, he would not go through with the deal. The car salesman received this letter on January 10 and again did not reply. The car salesman never heard from the collector again.

When did the offer that the car salesman made to the collector on January 1 terminate?

A On January 4, when the collector made a counteroffer.
B On January 9, when the collector mailed to the car salesman what amounted to a rejection.
C On January 10, when the car salesman received from the collector what amounted to a rejection.
D On January 25, when the 25-day option expired.

Answer 123

D On January 25, when the 25-day option expired.

The car salesman’s offer terminated on January 25, when the 25-day option expired. An option is a distinct contract in which the offeree gives consideration for a promise by the offeror not to revoke an outstanding offer. The collector paid the car salesman $100 to hold the offer open for a period of 25 days, and the offer could not be terminated before that time, not even by the offeree (here the collector). Nor did the offer survive the option period because the option specifically identified how long the offer would be open. (A) is incorrect because the collector’s words did not amount to a counteroffer because they merely inquired as to whether the collector would consider lowering his price; the words were not unequivocal. (Even if this were a counteroffer, it would not extinguish the car salesman’s offer, because of the option, as explained above.) (B) is incorrect because, as discussed above, even a rejection by the offeree will not terminate the option. Also, if the communication were effective as a rejection, it would be effective when received by the offeror. (C) is incorrect because, as discussed above, even unequivocal words of rejection by the offeree will not extinguish an option, absent detrimental reliance on the part of the offeror, which was not the case here.

Question 124

The manager of a shoe store noticed that mukluks were flying off the shelf in anticipation of another exceptionally cold winter. On November 1, the manager sent an order on the store’s own form to a local manufacturer of mukluks for 100 pairs, at a cost of $90 a pair, the price listed in the manufacturer’s current catalogue. The manager filled in the delivery date as December 1 and signed the form. The next day, November 2, the manufacturer mailed a signed confirmation on its own form, which was the same in all respects except that it included a clause calling for arbitration of all disputes.

Having found mukluks for $80 per pair from another supplier, the store manager phoned the manufacturer on November 4 and stated that the store no longer wished to order the boots. The manufacturer responded that it was too late, and that the store should expect delivery as promised in December. On November 5, the shoe store manager received the manufacturer’s confirmation.

If the store manager subsequently refuses the manufacturer’s delivery on December 1, who will prevail if the manufacturer sues the shoe store for breach of contract?

A The manufacturer, because the purchase offer was made by a merchant.
B The manufacturer, because the shoe store’s revocation of its offer was too late.
C The shoe store, because the arbitration materially altered the terms of the offer.
D The shoe store, because it effectively revoked its offer to purchase the mukluks.

Answer 124

B The manufacturer, because the shoe store’s revocation of its offer was too late.

The manufacturer accepted the store’s offer when it mailed its confirmation. Under the mailbox rule, acceptance by mail or similar means creates a contract at the moment of dispatch. Thus, the contract was created on November 2. It does not matter that the manufacturer’s acceptance did not reach the store before the store attempted to revoke. Because the contract was created on November 2, the store could not revoke its offer on November 4—it was too late. Thus, (D) is incorrect. (A) is incorrect because the store’s merchant status does not affect its ability to revoke the offer. Under Article 2 of the UCC, if a merchant offers to buy or sell goods in a signed writing, and the writing gives assurances that it will be held open, the offer is not revocable during the time stated (or if no time is stated, for a reasonable time). Here, the store did offer to buy goods in a signed writing, but the writing did not give assurances that it would be held open for any length of time. Thus, the offer was revocable. (C) is incorrect because whether an additional term in an acceptance materially alters the offer affects whether the term will be included in a contract between merchants; it does not affect whether a contract was formed.

Question 125

In MA, whose perspective is used in evaluating whether goods are unreasonably dangerous due to lack of adequate warning and therefore not fit for the ordinary purpose for which the goods are used?

A A product safety expert.
B A reasonable person.
C The consumer.
D The court.

Answer 125

C The consumer.

Question 126

In MA, which statement regarding limitation of a consumer’s remedies for breach of warranty is correct?

A Manufacturers can exclude or modify remedies for breach of implied warranties.
B Sellers can exclude or modify remedies for breach of implied warranties.
C Manufacturers can limit the remedy for breach of express warranties to repair if it maintains a repair facility within the state.
D Sellers and manufacturers can limit the remedy for breach of implied warranties to repair if it maintains a repair facility within the state.

Answer 126

C Manufacturers can limit the remedy for breach of express warranties to repair if it maintains a repair facility within the state.

Question 127

In MA, a manufacturer’s attempt to limit damages for breach of an implied warranty is:

A Always enforceable where the defective product is a nonconsumer good.
B Unenforceable with respect to an injured party only where the defective product is a consumer good.
C Always unenforceable with respect to an injured party.
D Enforceable even where the defective product is a consumer good.

Answer 127

C Always unenforceable with respect to an injured party.

Question 128

In MA, in which of the following situations would a nonrepudiating party’s performance NOT be excused?

A Repudiation with timely retraction.
B Repudiation coupled with actual breach.
C Actions for rescission.
D Actions for recovery in quantum meruit.

Answer 128

A Repudiation with timely retraction.

Massachusetts has carved out several exceptions to its nonrecognition of anticipatory repudiation, but repudiation with timely retraction is not one of them. The exceptions are for: (i) contracts for the sale of goods, (ii) suits for specific performance of real estate contracts, (iii) actions for rescission, (iv) actions for recovery in quantum meruit, and (v) repudiation with actual breach. Nevertheless, if the nonrepudiating party had materially changed its position before the retraction, such as that he contracted with another party for the services the repudiating party was to provide, his performance would be excused.

Question 129

Do question 7 in question set 2

Answer 129

see answer